Squaring the Circle
Discussion on Acquisitions, Defense Industrial Base and PPBE with Julia Gledhill
For more information:
+ https://www.stimson.org/2024/how-the-defense-industry-price-gouges-the-pentagon/
+ https://www.stimson.org/2024/current-defense-plans-require-unsustainable-future-spending/
+ https://www.undiplomaticpodcast.com/
+ https://www.cato.org/multimedia/power-problems/pentagons-budgetary-time-bomb
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- Broadcast on:
- 25 Sep 2024
- Audio Format:
- other
Hello and welcome to School In The Circle. On this episode, I'm joined with Julia Gledhill, who is a research associate for the National Security Reform Program at the Stimson Center. She focuses her research on writing on Pentagon spending, military contracting, and weapon acquisitions. Her previous roles include project and government oversight in the Friends Committee on National Legislation, where she worked on various national security issues related to Pentagon accountability, war power, suing, protection, drones, torture, and USDA law strikes. Julia has a bachelor's in economics and business at Colorado College. The View Thoughts on Painting Expressness Podcast are my own and my guests in, you know, reflective views and positions of the US government, Department of Defense, US Army, or any other organization. This podcast is for education, information purposes at home. All right, Julia. Hey, thanks for being on the podcast. I really appreciate it. Really appreciate your time. We're going to dive in and discuss quite a few areas involving defense. And, you know, I'm looking forward to getting your perspective, getting your take on some areas and defense, and learning from you. You know, you've been on a other podcast before, and you've published, and, you know, recently, you just had an article that came out in the Hill that you co-authored. So, you know, I kind of look forward to, you know, hearing about that, get your take. And then for the other podcast you've been on, and you know, the articles that you've written, I'll put those in the show notes for my listener to have ease of access and be able to, you know, take a look at and listen as well. So again, you know, thanks for coming on. I really appreciate it, and look forward to discussion, and I'll turn it over to you for any opening comments. Thanks so much for having me on, Matt. It's a pleasure to be on Squaring the Circle. We are recording on the 23rd anniversary of 9/11, so I've been reflecting today on the hubris of American foreign policy in the last several decades, the human impacts of forever wars, particularly given that we heard last night from Kamala Harris that they're, you know, proudly. She stated that we have no troops in active combat zones. This is kind of a rehashing of Joe Biden's, you know, statement that he repeats often, which is that we are not at war. And, you know, if that just isn't true, regardless of what you want to get in the details about active combat zones, I mean, you know, it's wild. We're sitting here at the 23rd anniversary of 9/11, and there are still thousands of troops in Iraq and Syria who have suffered attacks, you know, over the past almost a year now, and it's just, yeah, there's a lot to unpack, a lot going on. Obviously, the defense bill is still being negotiated by Congress, and, you know, it feels like 20 plus years later. I'm not sure that the United States has learned a whole lot from, you know, 9/11 and all of our adventurism thereafter. Yeah, you know, actually, I was doing some reflection too on 9/11, and one of the things that always comes, comes back to, you know, memory, and I'll never forget this. I remember it was history class, ninth grade history class, and, you know, all the classrooms had TV monitors, and, you know, immediately, once the first plane hit, you know, turned it over to the news, right? And we're sitting in there, and our teacher had to leave, you know, this is before the second tower got hit, and our teacher had to leave to go, you know, do whatever, and we're like unsupervised, unafraid, you know, at the time, and all of a sudden, we see, you know, on live television, the second tower got hit, and I remember a teacher coming in, we're like all, like, in awe, like, shock and awe, like, wow, what just happened? And then our teacher comes in, and he's like, oh, wow, hey, look, there's video footage of the first tower getting hit, and we're like, no, no, no, no, this is the second tower, and he's like, oh, oh my god, oh my god, and that, like, just replays back in, you know, my memory, so. But, okay, nothing was story time, so we'll get into talking about things in the defense, and so get your take on the budget, and so we could probably get into some of the elected officials and how they want to grow the budget, we're not, you know, we don't have the right amount. Some say we do, some say we need to have more, some say we need to have less, just curious on the defense budget, you know, looking at 25, you know, what are your thoughts on it? Do we have enough, not enough, or should we be trimming it down? I think that we should be significantly trimming down the Pentagon budget, not only because it's almost a trillion dollars, but also because of how quickly it's grown, and part of that is, you know, forever wars in Iraq and Afghanistan, as well as the, you know, 78 countries in which the United States conducted counterterrorism operations just in the past few years from 2021 to 2023, you know, these forever wars aren't just ground wars. And we also have every military service pursuing, you know, exquisite next generation capabilities because they are competing for budgets and honestly just like sexy photo ops, honestly. And it doesn't provide Americans additional security or safety. It is stealing our future. I think that we are rapidly approaching fiscal crisis. And so there are many reasons why we should trim down the Pentagon budget. And, you know, those are just a few of them. But, you know, of course, we have members of Congress, we have think tankers, various pundits in DC who think we are facing the most challenging security environment since World War II. And therefore, we need to rapidly, you know, invest and expand the defense industrial base and what have you. I don't agree with that assessment. You know, I think that the United States does face security challenges from, you know, countries like China and Russia. But I don't think that that drawing that comparison is helpful. You know, Biden did it in his State of the Union address back in the spring. You mentioned the piece that I recently wrote with my colleague Chris Preble about the National Defense Strategy Commission who drew this comparison as well. Also citing, you know, the fact that the United States has not faced mere peer competition since really the Cold War. And we have to outspend them again. The world is a different place. And, you know, the NDS Commission asks for sacrifice from the American people. I think Americans and Iraqis, Afghans, all of the people impacted by post 9/11 were we've sacrificed. There is no political will to spend more on the DoD and, you know, cut entitlement programs, which is what these people are proposing, even if they won't say exactly by how much. Yeah. And one of their proposals, right, was tax increases. If I had that right. That's correct. Yes. Yeah. So the whole great power competition and great power conflict, like that, I get it. And I think, you know, they need to generate a boogeyman in order to continue having a robust defense industrial base, right? But you only have so much inventory. You only have so much slits in the amount of forces that you have. And, you know, as we, you know, as you alluded to, like, you know, things, things cost money. And we're trying to modernize as well. And then people cost money, you know, the all volunteer forces, not cheap. And those are, you know, must pays. And, you know, when it comes to the comes of the budget, you got like three bins, right? And it's like, you know, people, and then you got operations and readiness, and you got like, modernization. And it's really hard to, like, balance, balance all three, if not, like, you know, impossible. And, you know, this is a discussion ahead with Major General Ferrari about a year ago. And it's, you know, just a concern of spending too much on, on modernization and not enough on the things that we could use now for deterrence. Just some hard, hard choices, especially with, you know, a static, static budget that's not necessarily growing. And a lot of people wanted to grow. You know, I got Senator Wicker about, you know, 5% GDP type, type growth. And I think like this last year with all the supplemental, it was like really, really around like 6%. Yeah, just curious, your thoughts on the whole like great power conflict, do you think it's just little, little extreme? Yeah, I mean, I don't think that spending more is the solution to a dynamic security environment to, you know, strengthening economic deterrence. I think that spending more on national security would actually have the opposite impact. And the reason I think that is because there's really just this misconception about the role of military spending in our economy and its impact on people. And part of this is, you know, this is Keynesianism. This is the idea that, you know, any type of government spending is obviously going to stimulate economic growth. Of course, you have other factors like consumption and investment. But when you think about military spending, sure, like there's kind of this narrative about military spending at the end of World War II, really bringing us out of the Great Depression and, you know, kind of helping us secure our position as the superpower in the world. But I've been digging into some research that kind of challenges this narrative, not by, you know, challenging the notion that military spending has a positive impact on growth. Obviously, it does as would any type of government spending. But that it actually has a negative impact on productivity. And so I'm really concerned about this idea of us, for example, making investments to, you know, create excess production capacity in the event that we would need to, like, ramp up production of munitions at the drop of a hat in the event of a great power conflict. Well, what happens if we don't go to war? Isn't that the, isn't that the ideal situation? I'm not saying that the defense industrial base is perfect or that everything we are doing makes perfect sense. You know, I think probably the easiest thing to reconsider is like the sort of scope of our security commitments. But that's, you know, a separate conversation. But I worry about our economic future. I worry about further entrenching generations of Americans in a war economy that doesn't serve us. It doesn't make us safer. It doesn't really make anyone safer. And, you know, the opportunity cost is really great, especially when you think about where that government spending could, you know, where that government spending could go in terms of our infrastructure or whatever. This is the, you know, age-old guns versus butter debate. But I also think that there's a strong security argument against increasing Pentagon spending. The Pentagon itself has said repeatedly that it does not have clear strategic guidance to make the hard choices that you refer to. I mean, it, you know, the DOD said this to the, to the PPBE reformers, the folks who were tasked by Congress with, you know, evaluating and reforming the Pentagon's planning, programming, budgeting, and execution process, which is the whole process through which the DOD, you know, basically prepares the Pentagon budget request for Congress. And I know you've talked to several people about PPBE on this podcast. I'm sure listeners are aware. But the DOD itself says it doesn't have clear, clear enough guidance for military leaders to make those types of trade-offs. And it ends up people are making decisions way beyond their pay grade. That is not fair to anybody. Yeah, actually, you know, bringing up PPBE. What are your thoughts on the whole reform commission? Do you think, do you have optimism? Do you think there's going to be some changes? Because I think, like all the changes that happen inside the building, the Pentagon, I think it, there needs to be some changes up on Capitol Hill as well. And I think, you know, some trust, trust there as well. And I think the number one thing is to, you know, get a budget on time, right? And here we are looking at a CR potentially as, you know, years prior. And, you know, entertaining a CR for like six months, which is, which can be devastating, which, you know, has impacts. So just wondering what are your thoughts on the PPBE reform commission? Do you think it's going to help at all? Yeah, so I've written a few articles about the PPBE commission since its members were established a couple years ago. I was disappointed in, I think, what I consider to be lack of, you know, thought and experience diversity on the commission. Almost everyone that participated in that panel has, has, or currently, you know, worked with the defense industry in some way. And so from my view, and I wrote this in like 2022, my view was essentially that, you know, there is an incentive for some of these participants to create a defense resourcing system that they could financially benefit from, or that their, you know, companies, what have you could financially benefit from. And of course, contractors have successfully lobbied Congress to quote unquote streamline acquisition for decades. Part of this is the whole acquisition reform movement and kind of gutting contracting regulation in order to, you know, relax oversight requirements and enable contractors to, you know, garner more leverage in the contract negotiation process. And we can talk about that later. Now, I think that PPBE spent several years talking to literally hundreds of people. Their report is very thorough. It's very long. It covers a lot of things that I don't know much about. I don't, you know, I'm not going to pretend to be an expert on communications platforms and practices between DOD and Congress. Some of that stuff seemed okay to me. I was, you know, kind of alarmed by the recommendations around streamlining acquisition, flexible acquisition, particularly because one of their stated priorities is to better align budgets with strategy. But then they say, we need to, but we need to rely on, you know, the other transaction authority or middle tier acquisition pathway in order to rapidly develop and field weapons. Because these are sort of the pathways through which we can avert, you know, the formal acquisition process, which is unnecessarily arduous and, you know, rigid. These are the types of adjectives that are used throughout the report to describe PPBE. And sure, it's old, but it also like does the job that it was designed to do, which is create points of reevaluation throughout a program. One of the recommendations the PPBE Commission makes is, oh, let's basically get rid of, you know, budget categories like R&D, O&M, procurement, and instead have what they call major capability activity areas. These are just bigger buckets of money that, in my view, would sort of blur milestone decisions around when to, you know, greenlight a program for the next stage of development. And that is alarming to me for a number of reasons. The biggest one is that, well, we've had decades of acquisition failures. And, you know, they make the argument that, oh, well, now that we're integrating so much software into systems, we need to sort of design our system that is conducive to iterative development. But they even say in the report that, you know, getting rid of these categories and instead organizing weapon systems by capability areas, like, for example, tactical aviation, like that makes sense in theory, but it would actually create, you know, it would erase like the baseline for a program so that it's very difficult to identify the source of cost growth. And so, you know, they say this, I also would also just note that the idea of capability driven budgeting is literally decades old. I found this proposal in a report that was published. Oh, gosh, it by the Rockefeller Brothers Fund in like the early, it might have been the early 60s, if not the 50s. I mean, the PBBE system was created by McNamara in like 61. I think that this report may have preceded it. It's not a new idea. I found that they recycled old ideas, repackaged them with a new name, and kind of called it good. But, you know, they even admit like this would make oversight a lot more difficult. So yeah, I mean, I don't think, you know, I think that OTA MTA pathways, for example, are exceptions to the rule, and that should remain the case. Yeah, it's interesting. You mentioned the like milestone decisions and it was sparked by my memory, like the F 35 right just became FOC what like a couple months ago. And yes, it was recently. Yeah, and that capability has been around since like time and memorial, right? Like, we've been investing so much into that capability since what the early 2000s, if not the 90s into that. It was, yeah, it was, I mean, it was supposed to be done in what like 2008, and they said it was going to be like $200 billion. And it's the life cycle cost is two trillion. Yeah. And the damn thing, like, it can't fly in the rain. Like, it's just, it's insane. Yeah, well, I guess when you when you have a capability, and then you have multiple services that are involved, of course, they're going to want certain requirements to fit the needs of their service. And so of course, like, you know, the Navy and wants it to land on a carrier, right? You know, other things as well on there. And it just, you know, requirements increase, which increases the cost over time. And yeah, and now we're now we're shift and focus on like fifth generation, right? Like that has a pretty pretty heavy price tag. And I that's right. Yeah, I'm not an Air Force guy, but you know, I find this find this stuff interesting. And to be fair, you know, the army has its faults as well. And there's a couple of programs or a couple, a couple modernization efforts that, you know, we've nixed just because of changes in the character war. And also just just price overruns like the, the FARA and the ERCA. And like in the past, you knew the FCS program is as well. So, you know, just out of curiosity, is there any other like, I know we just talked about the 35 35, but is there any other programs out there that come into mind that you think are, you know, just, you know, we're just spending overspending way too much on, like that specific weapon, that platform. I mean, obviously modernization costs a lot of money. But, you know, are we spending too much on high tech toys? Yeah, I mean, you know, I think like perhaps the go to answers are like the littoral combat ship. This is relevant to, you know, the United States failed and ineffective campaign in the Red Sea. I mean, Biden himself has said like we shouldn't be doing this. The littoral combat ship was supposed to, you know, fulfill that kind of mission. And the Navy's asked to get rid of it and Congress won't let it. And it really reflects, you know, the political engineering that goes on with a lot of these programs. I think the Zumok class destroyer is another example. But going back to kind of your question about sort of PPBE and like broader thinking on this, you know, a lot of it does go back to strategy, right? Like you're you're asking about high tech weapons. And it sounds really cool to pitch, you know, a capability that has multiple uses for like the F-35, for example. And, you know, my colleague Dan Grayser is really an expert on this. But what I've gleaned from him is that, you know, one of the biggest challenges in developing a program like that is well, you have to train your people to do all of those functions equally well, like ideally. And when you have design flaws, persistent design flaws that again, you know, the F-35 program, they're like lacking and still dealing with those. And it makes it really difficult to train your people to be able to use these capabilities effectively, which is the point of having them. And so some of these like multi-use capabilities, whether there's whether they're, you know, ships or aircraft, you have to think about how they're going to be used. I mean, the V-22 is another one. They're so fricking expensive. They've killed so many people, mostly in training exercises, from what I understand. Sounds pretty cool to be able to, you know, take off like a helicopter and also fly like a plane. But if you have safety issues, design flaws, the thing's so frickin' loud you can't use it. In Iraq, there was, you know, visibility issues with the, where they call it, the downwash. You know, like all of those things, well, they're just going to use their normal helicopters then. Because, oh, like it's hard to use. The pilots haven't had enough time to fly those things. They're too expensive if you, you know, get hit or you mess up, like you're throwing millions of dollars down the drain. I mean, it's so basic. But you have to create like an environment in which service members can actually train to do their jobs with confidence and relative ease, right? Like you want them to feel good about what they're doing rather than, you know, choose to, you know, opt for a helicopter over a V22 because, you know, it's sort of lower stakes. Like those are just very basic considerations. Cost, ability to train adequately so that your people feel good about what they're doing. I mean, I've never served, but man, I would shit myself if I had to go in that kind of situation. So that's kind of how I think about these things. And, you know, with PPBE too, the strategy appears to be, okay, we're having all of these issues. So let's just get rid of regulation and oversight so that we can do more faster. And it's like, dude, how is that going to help you with your stated priority of aligning budgets with strategy, which is, which again is like one of their main priorities that they talk about in the report. And it's like, how, how is this going to be strategic? If you basically open the floodgates to the development of new weapons and technology, blur the milestone decisions for, you know, their life cycle advancement, all of those things, it doesn't make any sense, especially when you have PPBE reformers who are also saying like, yeah, DOD itself says that it doesn't have clear enough strategic guidance. So it's like, everyone knows that there's this big strategic problem with what we're doing. Yet all of the solutions are lift the guard rails, open the floodgates, let's do it all and more, and basically blame processes for what are ultimately strategic issues. Rant over, forgive me for rambling. No, no, not at all. No issues. You know, it starts with a strategy. And that's like ingrained in, you know, at least, you know, my training, you know, it always starts with a strategy. There's a strategy and then there's the, then there's actions. So like, we all know the strategy, you know, the shift towards great power conflict, but then you got like this region over here, you know, between Africa and in Asia, proper, called the Middle East, that has a vote. And this is where, you know, some of the conversations that I have were, you know, again, back to my, one of my first points is that you only have so much inventory, so much slits, so much, so much, so many resources. There's not, there's not enough. So there's always that discussion of, well, the strategy says one thing. So why are we giving it to these folks when we should be prioritizing over here, sparked, sparked us, you know, my memory on that one. And, you know, the political engineering, you talked about that, I think that's fascinating. I think there was a, an article or, God, I should have went back and looked at this. It was an article or some sort of graphic I saw a couple years back where it was like the F 35, like all the, the manufacturing and, you know, key supplies come from those like 47 states or something like that. And then, you know, some other countries as well participate in the, in the manufacturing of it. So it's like, you know, too big to fail, like hard to kill, right? If you, if you have it spread out across all these, you know, different congressional districts, because then you can just go back to, you know, that representative and be like, Hey, are you sure you want to kill this? Because those are jobs that are going with it. So, yeah. Yeah, okay. Yeah, ran over on my part, Julia. I just go to acquisitions and, and, you know, contract and get your thoughts. So, I know you've written about this too, about price gouging at the Pentagon. I was wondering if you could, you know, share your thoughts on that, share some of your research, your writing, and, you know, maybe give some examples of the price gouging there. Yeah, sure. So I actually wrote a piece for the National Interest earlier this summer about how the defense industry price gouges the Pentagon. And the short answer is they do it legally. And I alluded to this earlier when I talked about, you know, contractor efforts to lobby Congress for not just more funding, but also less oversight. Part of what I was referring to there is their work to, you know, gut contracting law and, you know, the federal acquisition regulation, so that they can basically, you know, concentrate negotiating power when they go due deals with the Department of Defense. And so, you know, price gouging by military contractors is really difficult to track for that reason. I have people ask me all the time, why are these examples so old? Why are you talking about trans dime from 2019 and like, you know, hammers from the 80s, like, you know, this price gouging issue goes back decades. But part of the reason it's so difficult to track is because so much of it is legal. And, you know, there's a lot of good stuff in the federal acquisition regulation about, you know, when defective pricing or when fraud is found, you know, there are situations where technically, you know, you could have recourse in getting a mandatory refund from a corporation that has built the government, built the taxpayer. The problem is the applicability of these types of provisions. So over time, we've had Congress, you know, make a lot of exceptions to this contracting regulation. So that mandatory refunds aren't mandatory or that, you know, the Pentagon can't get the information that it needs to negotiate fair deals in the first place. And one major way that they do that is through certified cost and pricing data. So, you know, if you were going to hire a contractor to put a roof on your house, like, you would probably shop around number one, right? Well, you can't really do that in the defense industry because it's quite small. And, you know, there are at least so many options. And then so, okay, maybe you have one or two guys that can fix your roof. Okay, so you might do some research when they give you a cost estimate. You might look at your own damn shingles and see if you can pick them up from Home Depot rather than have this person sell you like a thousand dollar shingle per piece, you know what I mean? Like you would do some homework, right? Well, the Department of Defense, the Department of Defense has very limited capability to do that. Why? Because the, because contractors don't always have to give them that cost and pricing info. They can't just go look up like what, you know, a component part costs. And even if they do, they're using what's called, you know, historic data. This isn't terribly helpful for a number of reasons that I won't get into. But basically, it's like, the Deity can't do its damn homework on this stuff. They're getting built and it takes years to figure out. And usually, it's the IG that does it. And so that's kind of the 411 on price gouging. You know, we know that like, the price of stingers, for example, has gone up a crazy amount since the 90s. You know, the Pentagon guy who's now, oh gosh, he's, I think he's in the like, undersecretary of the Air Force office now, something like that. Shay Assad, he spoke to 60 minutes last year. They did this big investigation. It's like CBS news 60 minutes. And you know, they talked about the stinger. They talked about examples of price gouging going back to the 90s with like Boeing, Lockheed. I think they talked about TransDime, which was a spare parts supplier found to price gouge the Pentagon on more than one occasion from, you know, 2015 to 2017. They received like 16 million in excess profits because not only were they price gouging, but they were able to do that because they were a single source, sole source supplier to the Pentagon. So, you know, sometimes it's they're not required to give certified cost and pricing data. Sometimes they're a sole source supplier, like there's sort of a, an array of reasons why the DOD might not get this cost and pricing data. But for TransDime, I mean, they were just like, cool, you can't go anywhere else. We're going to sell you spare parts in some cases at a 4000% markup above the fair and reasonable price. And then they did it again. They made like 21 million in excess profits from 2017 to 2019. And this is my favorite bit of the TransDime story is that, again, I mentioned this before, they weren't actually subject to the mandatory refund, like part of the federal acquisition regulation. But because they got so much public shit. Sorry for cursing so much on this podcast. No, no, you're good. Because they got so much shit for it. They finally agreed to like partially refund the panel. Or actually, no, it was the full refund for the 16 million in 2019. But they didn't refund. I don't think any of the 21 million from the from the latter example of price gouging. They were like, okay, first time, fine, we'll give you that 16 million back. Second time, we're keeping it. So it's just it's ridiculous. It's ridiculous. And it sucks that there are good laws on the books that just don't apply in a lot of cases. And it takes us so freaking long to find these examples. And then by the time that we do, you know, we hear from certain people in Congress, oh, well, it's fixed now, you know, like it's been several years, like it's all good. We're not finding more examples. And I just don't believe that that is the case. Yeah, I remember that 60 minutes video. That comes to mind quite often. And I remember like the example that really comes to mind was the gentleman was talking about like the price of a hammer is like $435. And I'm like, what that is insane. Like, you could literally go to the dollar store and pick up a hammer. Like, what do we what do we do it? Yeah, in like the defense health system, there are examples of this too. I know, I think Senator Warren raised this, but they were like overselling through the defense health system, like a try care. They were like charging, you know, like far above the reasonable price for like breast pumps that you can get at Walmart for like, I don't know, 20 bucks, but it was like hundreds of dollars. Like it's just it's insane. Like this is how we're spending harder in taxpayer money. Yeah, and I don't want to put words in your mouth. I think you agree to this, you know, gets after my following question of, you know, do you think we're living with a sins of our fathers? You know, the 1990s, like last supper, the whole consolidation of the defense industrial base where, you know, we reduce the amount of competition, consolidate everything into just a few companies got like the big five, the big six, you know, used to have Lockheed and then Martin, I think it was Martin Marietta. And then now you got Lockheed Martin. And now you don't have all this competition. And you know, you talked about it, like you got like one or two, you know, companies that are fighting over a, you know, requirement and they got, you know, there's no other, there's no other there to compete. And you got like the smaller companies, like the unicorns that are trying to get in. But there's that thing called like the Valley of Death, that's like hard to overcome. And only like the juggernauts of, you know, like the big five can, you know, can, you know, sail through that storm. So, um, yeah. So I think you agree, but you know, I just want to hear from you, like, you know, is the big five? Like, is it too small? Like, you know, should we break it up companies? You know, I've also heard like nationalization, you know, is a out there, I've seen that being thrown out there. So just wondering what your thoughts. Yeah, this is a complicated question to answer. I think, you know, consolidation like made sense as far as, you know, obviously those companies can't survive. If the United States is not spending as much on defense, peace dividend procurement holiday, et cetera. That's like, that's over. That's been over. And so the fact that we still have such a small industry that is able to take advantage of, again, having monopoly power, but also monopsony power and that the government is their only buyer. Like, that is an issue. I think that there's a very strong argument for nationalization. I mean, lucky makes like 85% of its revenues from government contracts. We're not far off like this. It's not the defense industry is not exactly the paragon of like free market ideals, which so it's like, yeah, like they rely on government contracts to exist. And they get like the most advantageous contract financing really than like any other industry in that the government often reimburses research and development costs and capital investment costs. The DOD published what was a really awesome study on this last year, where it solicited, you know, studies by a bunch of FFRDCs, federally funded research institutions or centers and like universities and the like, to kind of evaluate the financial health of the defense industry. And they found that, you know, because the defense industry receives such advantageous, such favorable financing from the government, they actually reap incredible financial returns. So what you often hear contractors say is, oh, well, like our profit margins are so small compared to other industries. And, you know, that's why you end up seeing North of Grumman go to Congress and say, ooh, inflation, like, give us money on our firm fixed price contract. Like depending on literally ask them for evidence of inflation impact and they refuse. So they're always trying to, you know, milk the government for all it's got. I mean, it's a company. So not saying companies shouldn't make money. But, you know, that's the context in which we're operating. And profits don't tell the whole story. They experience, you know, better returns on assets, on equity, on all of these, you know, major corporate financial metrics, better than most other industries. And the reason is that they don't have to invest in their businesses. Other companies, other sectors have to actually do things to increase efficiencies, make capital investments, like train their people better, whatever, whatever have you, like, that's going to, you know, increase output or increase efficiency in some way. But instead, defense contractors get to just vibe, like they get to do a bad job, they get to be late over budget, not make any investments in their businesses and still reap crazy financial returns and get government contracts, because there's just not that many options. So, like I said, I think that there's a strong argument for nationalization. I think that, you know, the smaller firms that are trying to get into the, get into the field, I think that there are things that Congress can do to protect them from bullying, basically, from the primes. I mean, there's a lot of writing. And in fact, the study talks about this too, how small contractors take on about 16 to 70% of the work that primes are actually awarded to do. But they do not always, you know, get paid on time or in full by those primes. So, the primes get to pocket the money and offload the work, and that's an issue. So, I don't know if I answered your question, but I do think that, you know, consolidation paired with all of these other factors, as well as, you know, the acquisition reform movement, where we got rid of a lot of these, you know, oversight mechanisms to prevent price gouging, financialization in general, you know, the idea that executives are driven by short-term profits and not by long-term productive capacity, even when you are doing things, quote-unquote, in the national interest, you know, that's a big issue. Yeah, I know you absolutely did, Julia. And then I think we've determined that there's a lot of challenges and problems and acquisitions, you know, from our conversation. So, all right, with that being said, if I gave you a magic wand and you could make one big change and only one change to the field of acquisitions, what would it be? So, this is an easy question for a policy person, because I always have an agenda, no, I'm kidding, I don't. But for this question, I would say that Congress should eliminate the statutory requirements for unfunded priority lists, also known as UPLs. Some call them unfunded requirement lists. That's a clever rebranding, but, you know, basically, Congress's required the Pentagon military components, combatant commands, et cetera, to produce these wish lists outlining itemized funding requests outside the formal budgeting process every single year. The DOD is the only agency required to do this, you know, required to collect these lists from various aspects of the military establishment. But basically, they're wasteful and they muddy strategy even further. So, we have, you know, unclear, expansive, unrealistic strategic goals in my view that are outlined in various strategic documents, like the national security strategy, the national defense strategy. I would imagine the defense planning guidance, but that's classified. So, I've never seen that. Like I mentioned earlier, military leaders struggle to make the decisions necessary to, you know, meet those goals. And that's part of why we have so much failure in the acquisition realm. And UPLs exacerbate that issue. You know, basically, it's the military services saying, hey, if there's extra money lying around, we'd love these things, but, you know, they weren't important enough for us to include in our formal budget request, which also, you know, necessitates the requisite justification materials. They're wish lists. And it's super wasteful. I think that we should get rid of them. Bob Gates was pretty successful with this back in the, what, like 2009, like late 2000s. He hated them. The Secretary of Defense Austin has said that we don't need them. And yet they persist. Yeah, so that's interesting, Julia, because I've had quite a few guests on that have been very supportive of UPLs. And you've taken the opposite, which is totally cool. I like getting perspective. So really, really interested. You know, it's fascinating, because I've asked the same question about, hey, were your thoughts on, you know, UPLs, you know, do you think it's a good thing? Do you think it's something that we should, you know, get rid of, you know, because if it didn't make the President's budget, then why should we be asking Congress for it, because they should be set the priorities of what we're, you know, asking money for. And, you know, every single one has been very supportive of having it. So fascinating. All right. So what we, so while we still have some time, one question on like foreign policy that I want to get your, get your take on just out of curiosity, you know, for the next presidential administration, whoever that shall be, you know, what would be your recommendations on, you know, what should we be focusing on foreign policy wise, you know, and like, what is it like your preferred approach, you know, should we go the, you know, the Donald Trump isolationist, which I don't know really isn't really as an isolationist, but or the, you know, primacy internationalist, or we should be like more of a restraint and retrench, right, you know, those sort of approaches. So just wonder what your thoughts are on way forward on foreign policy. Yeah, big question. I will try to be brief. But, you know, I'm a restrainer. I don't think that primacy makes sense. I don't think that it's good for us for the world. I don't think it's viable. Most importantly, one might argue, you know, the moral arguments, the geopolitical implications, you know, we can talk about, but I literally don't think that it's sustainable. And as I started the podcast with, I truly feel that my future is slipping away. I feel like the decision makers in government right now are instituting policies that inhibit my kids, their kids, and their kids from living in a safe and prosperous United States. And I believe that I say that with my chest. And so, yeah, I mean, I think we need a wholesale kind of review and reflection of our strategic thinking. I've said this a few times throughout our talk, but you know, it just, it feels like there is recognition that we are approaching, if not already, at strategic insolvency. You know, there have been several crises in the last several years, whether they be global pandemics or war in Europe. But, you know, the United States can't do everything. We have constraints. And the American people have constraints. There is no political will for us to, you know, raise taxes, cut entitlement programs for the DOD, because the Pentagon doesn't have enough money. I mean, I just don't think that anybody cares about that, not that policymakers care about what the public thinks necessarily. But, you know, I think we need a strategic review. I think that we, you know, don't need to be America, the world's policemen. I think that retrenchment in Europe makes sense. That doesn't mean leaving Europe behind at all. In fact, I, you know, am very supportive, of course, of continuing to strengthen our partnerships with allies. But, you know, we can't pay for everything. We can't do everything. We can't be the global guarantor of security. I think that our force structure should reflect that. I think that, you know, as I mentioned at the top, and again, on the 23rd anniversary of 9/11, we are still in Iraq. And so I think we should get out. And, yeah, the last thing I'll say, because this is so easy and straightforward is, yeah, we should spend less on the Pentagon. Yeah. So, okay, just spark something came up. So, I think, you know, just personally, Matt Bigelow, I think that we should tax the American folks for defense spending. And like, and here's why, because it would add more skin in the game. It would be a forcing function for people to really care about, you know, what goes on in the world. And so I go back to this one story that I heard a few years ago of this, you know, former national security adviser for a sitting senator telling me about, you know, he was, he was tasked to give all the elected officials, all the elected representatives in that state of briefing on Afghanistan. And there was one elected official that just kept canceling on him. Like, I don't care. I don't want to, you know, don't want to, don't want to listen, blah, blah, blah. And then he finally got ahold of him was like, hey, you know, I was, you know, going to give you this briefing. And, you know, the representatives like, I, I don't care because my district doesn't care. So that's why I don't want to, you know, know about it. So, yeah, I just just my thoughts on that. But, okay, Julia, let's transition to the fun questions and get to the conclusion. So these are the questions that I ask every guest regardless of the topic. And so I'll kick things off with, you know, what is your all time favorite book? Yeah, so I'm gonna have a really boring answer to this question because I read a lot of fiction and I'm not sure if people would be interested in that. But so I would really recommend two books. The first is the permanent war economy. And the other is Pentagon capitalism. They're both by Seymour Melman. He was a political economist, peace activist, but also an engineer who fought at Columbia for a long time. He has since passed. But, but he reading him is really what he is the reason I'm in this field. I will say that. And it was incredibly formative. Oh, sorry, that was my cat. Incredibly formative for me in shaping the way that I think about the military budget, our role in the world, and, you know, our economic future. Yeah, I got to stop asking that question because my reading list just keeps getting bigger and bigger and bigger. All right, next one. So like, what keeps you up at night? What future capability worries you the most? You know, I get AI, I get space, I get information. You know, what worries you? Yeah, I'll be super classic with this one and just say that nukes really scare me. You know, I mean, we see more Melman has actually written a lot about this as well, but yeah, we have a lot of them. We can blow up the world several times over. I don't love that. I don't think that modernizing all three legs of the triad fares well for, you know, strategic stability. I don't think we have the hotlines or the command control systems in place to I don't think that they are where they should be. Let's say that. All right. And then, you know, last question. You know, you work in policy, work to some think tanks. Just wondering, you know, you know, over your career, you know, some like professional development related, you know, if there's any any advice, anything you've learned words of wisdom type stuff that you wouldn't mind sharing with, you know, my peers. Yeah, my biggest piece of advice is to really just engage with everyone that you can. I may have contrarian takes, at least I was compared to maybe other guests on this podcast, but you know, I am very open to conversation. And I really appreciate people who come to me to talk about these issues. The more the further that I get in my career, the more that I read, the more that I that I write, truly the less that I feel I know, which is not the best thing to share probably. But it's so true, you know, just stay curious, read a lot, talk to as many people as you can, because there's just there's so much to learn and understand out there. And frankly, you can't do it alone. And you never will. But talking to other people will help a lot. All right. Well, thanks, Julia. I know, I really appreciate your time. We've covered a lot of ground. I didn't think we were going to dive into PPBE. But it happened. So it's awesome, great. You're right, contrarian views, you know, juxtapose most of the guests that I have on here, but that's absolutely 100% totally cool and okay. Because it's about, you know, perspective and diversity of different views and thoughts. And, you know, I feel like I'd be doing a disservice, you know, me like me personally, I like to, you know, see, you know, everything in order to come to a conclusion and decision, like to see different views and different thoughts behind things, you know, I don't focus in just one, you know, specific area, I like to see different things. So, you know, I can't say enough how much I really appreciate your time and coming on. Again, I will post, you know, some of the articles and other podcasts you've been on, especially like the undiplomatic podcast that's, you know, a phenomenal one. Put those in the show notes for the listeners to have ease of access and all that. So again, Julia, thank you so much. And I will give you the final word. Thank you, Matt. I appreciate the opportunity to speak with you and the opportunity to, you know, get into what are really gritty issues is probably the most substantive podcast interview I've had in a while. You know, there are a few people in DC who know what PPBE even is. And I say that even in like the foreign policy space. So it's always great to talk about these broader issues. I guess the last thing I'll say is, you know, seeing as it is the 23rd anniversary of 9/11. And I'm, you know, sitting comfortably in my apartment in DC. Our policy choices have really profound impacts on people all over the world. And I just encourage folks to keep that in mind. Because we can have conversations about great power conflict and what it would look like. And, you know, war is really damaging and should be averted at all costs. War is not inevitable. And, you know, war is hell. And we should remember that, especially those of us who are working in think tanks and advocacy organizations in the nation's capital. Thanks for listening. Stay tuned for future episodes in the next couple weeks. (gentle music) You