National Security & Defense

Lessons for the Navy from SpaceX and the Commercial Sector

Observers watch a SpaceX Falcon rocket lift off from Vandenberg Air Force Base, Calif., August 2017. (Gene Blevins/Reuters)
Public-private partnerships can spur vital R&D efforts.

The United States Navy has a goal of increasing its fleet from its current inventory of 280 ships to 355, but its recently released 30-year shipbuilding plan does not reach that goal until the 2050s. This is despite the fact that the recently released national-security strategy publicly recognizes that the United States is now in a great-power competition with China and Russia. In addition, China’s investments in its own navy will enable it to surpass the U.S. Navy in size within the next decade; China may supplant the United States as the most influential nation on the global scene shortly after that. If the United States is to maintain its role as the key player, it will have to make changes in the way it approaches building and maintaining instruments of national power. Fortunately, there are some good examples of how to do this.

Just over a decade ago, the U.S. government engaged in a public-private partnership with Elon Musk’s fledgling space-launch company, SpaceX, to create a hybrid company that paired private capital with government funds. In the beginning, with the Space Shuttle program approaching its end, the partnership aimed to find an affordable method for launching resupply missions to the International Space Station. As the program matured, however, it became something much greater: a commercial business that overcame massive infrastructure costs to become a core part of the nation’s launch enterprise, all within the space of a decade.

Historically, government research-and-development funding has reduced the risk of commercial companies as they wrestle with key technological “does it or does it not work” questions. The government’s incremental approach has worked well overall for our armed forces, for whom rapid fielding, while important, is often not as critical as ensuring the product works the first time, every time.

By contrast, commercial funders, including venture capitalists, view rapid fielding, or “speed to market,” as they call it, as paramount. Consequently, their funding method addresses up front the business question of risk: “Does anyone want to buy this product or not?”

Much-needed innovation remains in the commercial world and far away from the Pentagon.

The fundamental difference between investment philosophies in the government and commercial sectors means that much-needed innovation remains in the commercial world and far away from the Pentagon.

SpaceX emerged as that rare example of an entity that correctly addressed the dichotomy between technological risks and business risks. Yet SpaceX was never going to work on a large scale, given that its ultimate success stemmed from a billionaire owner’s facing the threat of insolvency due to a series of launch failures prior to the first successful launch of a Falcon rocket in 2008. When holding this up as an example of public-private funding that may expedite development for, say, a 355-ship Navy, we should consider some key “modifiers.”

The Navy needs to increase the size of its fleet if it is to be large enough to conventionally deter an antagonistic Russia and a resurgent China. The U.S. fleet must grow quickly, within the next ten years if it is to be successful in its deterrence. That means it must rapidly expand and diversify its industrial base. The fleet that once drew ships from 14 commercial shipyards has seen this production capacity cut in half, and there are few commercial incentives for the creation of new private shipyards.

The government should start by identifying the key subcomponents that could be developed in the commercial sector. These could be anything from commercially developed ship propellers to advanced radars.

In order to legitimately replicate the SpaceX success story for the purposes of the Navy, the government should start by identifying the key subcomponents that could be developed in the commercial sector. These could be anything from commercially developed ship propellers to advanced radars. The Navy could then work with major defense ship and aircraft manufacturers to fulfill its core mission of mastering a new total acquisition and construction system design. This would also motivate current defense suppliers, many of whom felt left out in the cold with the Obama administration’s perceived focus on Silicon Valley with the “Third Offset Strategy.” This “strategy” sought to use technology, especially commercial technology, to sustain America’s military advantage. By pursuing a dual-track funding approach with government and private funding, the Navy has an opportunity to adopt the best of both worlds.

This approach would combine existing government R&D funding with investments from multiple, additional sources. This would prevent overreliance on a single billionaire funder who might not remain financially committed. Most venture-capital projects in the commercial sector follow this model, with shared risk accompanying shared reward. Such an approach adds resilience to technology development, ensuring that more hardware and software products get to market and may quickly be adopted by customers. The defense industry, whether individual-parts suppliers or full-service shipbuilders, sorely needs this speed and flexibility.

With the breakdown in the bipartisan national-security consensus, it’s harder than ever to reach agreement on the proper balance between high-end technological capabilities and the sheer number and variety of assets the military needs. Our current annual $700 billion defense budget buys a smaller Navy today than when we fielded a Navy of more than 600 ships during the Cold War, when we had an annual budget of $579 billion (adjusted for inflation). Cost growth, capability requirements, and exponential increase in personnel salaries and benefits have chipped away at the discretionary dollars that previously would have been available to fund more frigates, bombers, and tanks. It is imperative for military planners to adopt hybrid investment models that can allow citizens in the commercial sector to help us quickly attain the force we need — especially before we really need it.

 

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