Palantir's Defense Reformation: Rebuilding US Industrial base

The US defense sector can foster innovation and regain competitiveness by addressing the issues that have led to its current state, as detailed in the sources. The primary problem is the existence of a monopsony, where the government is the sole buyer, which has stifled competition and innovation....Here are key reforms suggested in the sources to address this:

●Increase Competition: The most critical step is to introduce competition into the defense sector. This can be achieved by:

○Approximating market mechanisms within the Department of Defense (DOD), such as allowing the Space Force to compete with the NRO.

○Encouraging competition between different service branches.

○Enabling Combatant Commands (CCMDs) with budgetary power to introduce strategic competition.

●Reject Cost-Plus Contracting: Move away from cost-plus contracts, which remove the incentive to control costs and innovate.... These contracts reimburse contractors for their expenses plus a profit, leading to inflated budgets and slower development.

●Agile Budgeting: The DOD needs to be able to reprogram funds quickly and efficiently, not in the current two-year cycle.

●Prioritize Talent: Emphasize the importance of retaining and empowering exceptional individuals, or "power-law talent". This includes:

○Ensuring continuity of leadership in key positions, instead of frequent personnel rotations.

○Recognizing that "the person is the program," meaning success depends on the talent and leadership of the individuals in charge.

●Focus on Outcomes: Focus on achieving desired outcomes rather than strictly adhering to predefined requirements1118. The sources suggest that the most important projects don't come from requirements, and the current process stifles creativity.

●Integrate Requirements and Solutions: Integrate the creation of requirements and the delivery of capabilities.

●Address Conway's Law: Recognize how the DOD's siloed service structure hinders effective joint operations, and therefore reform organizational structures to encourage communication and collaboration.

●Promote Commercial Business: Require defense contractors to have substantial commercial businesses. This would:

○Subsidize research and development (R&D) with commercial revenue.

○Prove their competitiveness in the broader market.

○Encourage continuous innovation.

●Risk Capital: Emphasize private risk capital over taxpayer money for R&D. Independent research and development (IRAD) that is cost-reimbursed is seen as an "indulgence".

●Small Business Growth: Design small business programs to help businesses grow, rather than just maintain the status quo.

●End Government Competition: Stop Federally Funded Research and Development Centers (FFRDCs) from competing with private industry.

●Productivity over Stockpiles: Focus on the rate of production and the ability to scale up manufacturing, rather than stockpiling weapons. The conflict in Ukraine has demonstrated that the rate of production is more critical than stockpiles.

●Let Reference Architectures Emerge: Allow solutions to emerge organically instead of trying to predetermine them.

●Emphasize the rule of law: Ensure contracts are used to safeguard the government's interests1126.

●Empower the People: Enable people to connect directly to the mission and remove the need for intermediaries. This relates to a call to reduce the DOD’s secretive and monopolistic practices.

●Warriors Must Code: Ensure that service members have coding skills to understand and leverage software, which is now a crucial component of modern warfare.

These changes are aimed at fostering a more dynamic, competitive, and innovative defense industrial base. The current system is compared to a "communist" centrally planned approach that stifles innovation and favors process over results. By embracing market principles and focusing on outcomes, the US defense sector can become more agile and responsive to modern threats.