Ep 11: How Does DoD Value Commercial Innovation?
November 11. 2020
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This is the second episode taken from my conversation with Eric Lofgren.
In our first episode, Eric and I discussed the challenge of how DoD counts costs, a system that is based on an industrial view of the defense industry and one that dates back to the second world war. His conclusion and a view that I share is that DoD’s cost accounting system is outdated and does a poor job of providing guidance to the department’s decision makers as well as members of Congress.
Yet, as the department accelerates its efforts to woo commercial innovators to bring their best ideas to the military, that begs this important question: how will the department value these innovations? Will it be based on a “works for hire,” “time and materials” accounting method as used by the defense prime contractors? If so, many commercial firms won’t engage with DoD. For them, value is determined by a broader market and is imputed based on a variety of factors, many of which are unrelated to the underlying cost of goods sold - or services rendered.
You can listen to the full episode here on our show, Commercial Innovation for Defense, on Apple Podcast, Spotify, Google Podcast, Overcast, or wherever you listen to your favorite shows.
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