February 21, 2017

Seizing the Initiative

Turning AT&L Reorganization into Technical Advantage

The Department of Defense (DoD) is primed for change – in theory. The National Defense Authorization Act (NDAA) for Fiscal Year 2017 mandates major organizational reforms within the Office of the Secretary of Defense (OSD). Most notably, the legislation disestablishes the Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics (USD(AT&L)) and creates two new under secretaries, one for research and engineering and one for acquisition and sustainment, requiring a new division of responsibilities and personnel under the revised organizational chart. These mandated changes provide newly confirmed Secretary of Defense James Mattis with a significant opportunity to address endemic challenges in his organization, particularly the ongoing erosion of U.S. military-technical superiority.

Secretary Mattis will need to take early action to capitalize on this opportunity. While the structural reforms required by the 2017 NDAA do not have to be implemented until February 1, 2018, the secretary is required to submit an interim report detailing the scope of intended reforms to the congressional defense committees no later than March 1, 2017. A final report including Mattis’ implementation plan is due just a few months later, on the 1st of August.

The secretary should do more than merely respond to congressional requirements on schedule – he should use this mandate as a springboard to address the legitimate issues that Congress seeks to remedy. To achieve this, Mattis must first identify the particular problems he wishes to resolve. The secretary could reasonably define a military-technical innovation problem, a larger strategic misalignment associated with how the DoD develops military-technical superiority, or a more general business management problem.

However, developing and implementing improved OSD structures will not be the only demanding, complex matter on Mattis’ to do list. In addition to dealing with the department’s infamous bureaucracy, Mattis must also contend with the demands of ongoing operations in multiple theaters, reinvigorated great power competition, nervous U.S. military allies, and the president’s calls for a military buildup. At the same time, he will be assembling a new leadership team within the Pentagon, initially operating without the political appointees who would ordinarily manage such reform.

Secretary of Defense James Mattis arrives at the Pentagon on January 21, 2017, alongside U.S. Marine Corps General Joseph Dunford, Chairman of the Joint Chiefs of Staff.

Tech. Sgt. Brigitte Brantley

Given these competing demands, Mattis will need to take a disciplined approach to effectively leverage the reforms mandated in the NDAA without overtaxing DoD resources and exhausting key stakeholders’ appetites for change. Whichever problems he decides to address, the secretary must establish a realistic vision and theory of change and empower a capable, cross-functional team with sufficient resources to implement his vision.

The Opportunity

The 2016 and 2017 NDAAs represent the most sweeping defense reforms affecting acquisition and DoD management in a generation. These laws have provided significant new authorities for the acquisition of commercial technology for military purposes, allocated the means to speed the development and deployment of new capabilities to the armed forces, and increased the autonomy of the military services to make acquisition decisions. While mandated changes to the organization of AT&L will naturally draw significant attention, the deeper opportunities associated with these recent reforms should not be overlooked.

Convinced that AT&L “has grown too big [and] tries to do too much,” the drafters of the 2017 NDAA roughly divided the organization’s responsibilities between two new offices: the Under Secretary of Defense for Research and Engineering (USD(R&E)) and the Under Secretary of Defense for Acquisition and Sustainment (USD(A&S)). As part of this change, the NDAA does away with all assistant secretary and deputy assistant secretary positions, including those established by prior statute. Beyond requiring this top-level reorganization, the legislation wisely leaves the finer details of organizational design up to the secretary of defense.

Over the past two years, Senator John McCain (R-Ariz.), chairman of the Senate Armed Services Committee, and Representative Mac Thornberry (R-Texas), chairman of the House Armed Services Committee, have led the push for the major defense acquisition reforms included in the 2016 and 2017 NDAAs. (U.S. Department of State / Mass Communication Specialist 1st Class Daniel Hinton)

Congress does, however, provide some guidance to the secretary of defense regarding the purview of the new USD(R&E) and USD(A&S) offices. The 2017 NDAA broadly distinguishes the duties and powers belonging to each new office, charging the USD(R&E) with “advancing technology and innovation for the armed forces (and the Department)” and the USD(A&S) with “delivering and sustaining timely, cost-effective capabilities for the armed forces (and the Department).” Notably, the NDAA explicitly establishes the position of USD(R&E) as senior to USD(A&S), embedding in the organizational hierarchy the intent for innovation to take precedence over acquisition.

Beyond the reorganization of AT&L, the 2017 NDAA also establishes a chief management officer (CMO). The creation of this new position provides a mechanism through which the secretary can address business management challenges originating outside of the acquisition system. The mission of the CMO includes managing “business transformation, business planning and processes, performance management, and business information technology including the allocation of resources for business operations, and unifying business management efforts across the Department.” The CMO is granted “the authority to direct the Secretaries of the military departments and the heads of all other elements of the Department” regarding the operations under his or her purview, but the NDAA says little else about how the CMO should impact (or not) existing management structures within OSD.

The opportunity for the DoD is not simply to move offices around on an organizational chart…Fixating on reorganization will likely only add confusion to an already overburdened bureaucracy and allow the fundamental challenges to generating military-technical advantage to persist.

These required changes to senior leadership positions will likely draw much of the department’s focus as it responds to the NDAA. However, the opportunity for the DoD is not simply to move offices around on an organizational chart. Indeed, fixating on reorganization will likely only add confusion to an already overburdened bureaucracy and allow the fundamental challenges to generating military-technical advantage to persist within new OSD structures.

Secretary Mattis should consider the totality of, and the congressional intent behind, the 2016 and 2017 NDAAs. Considered in that context, the true opportunity for the department is to consciously design the strategy, methods, organization, and incentive structures by which it generates military-technical advantage and the ways in which it manages itself toward that end. Congress is virtually begging the department to change, volunteering new authorities and removing historic organizational roadblocks. Even the mandated reporting schedule in the 2017 NDAA seems designed to offer the DoD an opportunity to request additional legislative action in the 2018 NDAA to support the secretary’s intended reforms and implementation plan.

The key question for Secretary Mattis, then, is how to capitalize on this opportunity while balancing competing priorities and the need to respond to the legitimate crises that beset the secretary of defense on a daily basis?

Setting an Agenda for Change

With an intentionally broad mandate from Congress but competing priorities and finite resources, Mattis must quickly identify the specific problem he wishes to address.

The redistribution of AT&L functions to the new USD(R&E) and USD(A&S) offices is already intended to accomplish a specific congressional objective: to create space for technological innovation separate from the constraints of the acquisition system to arrest the decline in U.S. military-technical superiority. To build out these offices’ portfolios and responsibilities, the secretary will still need to define the specific priority challenges he wants to address and associated reforms.

As Mattis establishes his particular definition of the problem, he must also weigh the costs associated with implementing meaningful solutions. Those costs should be considered in terms of political capital, management burden, time, personnel, financial cost, and bureaucratic upheaval, as well as opportunity costs. Establishing an agenda for lofty change to the acquisition and technology development processes with insufficient will or resources will lead to ineffectual execution. A poorly managed reform effort will have the potential for negative, unintended consequences in terms of bureaucratic dysfunction and loss of faith in the secretary’s leadership. Therefore, the challenges Mattis chooses to prioritize should match his appetite for change and, accordingly, set the scope for reorganization within OSD.

There are three distinct ways in which the secretary could define and scale the specific problem he wishes to address, each requiring different levels of effort:

1. The Military-Technical Innovation Problem

A lack of access to and support for new sources of technological innovation.

Technological innovation is essentially the core issue the 2017 NDAA seeks to address with the creation of the USD(R&E). At present, the development and wide scale acquisition of innovative technologies is constrained by the policies and risk averse culture of the major acquisition system. Currently, AT&L is expected both to oversee complex, multi-billion dollar programs – which requires a culture of strong oversight, risk mitigation, and process compliance – and to support out-of-the-box thinking and disruptive innovation. Historically, AT&L has not been supportive of the offices that oversee disruptive innovation, as was made clear by Secretary Carter’s decision to have the Defense Innovation Unit Experimental (DIUx) report directly to him – a highly unusual arrangement for an office of its mission and size.

Creating an office within OSD designed to guide and oversee military-technical innovation, separate from A&S responsibilities, could create a culture and space for pursuing partnerships with non-traditional suppliers of advanced technology. If successful, it would also deliver more original, demonstrated capabilities to the armed forces. Addressing this problem would require the secretary to focus specifically on conferring adequate institutional authority to the USD(R&E), empowering and incentivizing the organization to take advantage on the authorities already provided to it under the 2016 NDAA, and establishing processes to enable R&E’s work to positively impact matériel solutions for the services.

Focusing exclusively on improving DoD access to and support of technological innovation would be a clearly bounded and worthwhile initiative for Secretary Mattis, largely concentrated on separating R&E functions from A&S and empowering the new under secretary. However, limiting reform primarily to the new USD(R&E) would not necessarily address important issues in the acquisition system, including the speed at which capability is developed, cost growth, and bridging the “valley of death” between new technologies and major programs, nor would it serve to initiate other important organizational changes.

Theory of Change

Addressing the DoD’s lack of access to and support for new sources of technological innovation would require the secretary to establish a powerful USD(R&E). The core functions under the purview of the USD(R&E) should include oversight and execution of prototyping and experimentation, adapting commercial technology for military purposes, and establishing new acquisition methods. This office will require a workforce that is educated, trained, incentivized, and managed differently from traditional acquisition organizations. Ideally this organization will develop a distinct and positive culture that encourages innovation and risk taking.  

Other considerations should include providing a permanent and supportive home for organizations like the Strategic Capabilities Office and DIUx, as well as DARPA, the defense laboratories, and other basic research efforts. Dedicated leadership would be empowered to clear bureaucratic roadblocks for these organizations and help provide more stability within Research and Development, Test and Evaluation budget allocations. By providing a dedicated, supportive environment for technological innovation, OSD and the services would generate technological breakthroughs that would hopefully be turned into programs for wide-scale adoption.

2. The Strategic Misalignment Problem

The fundamental misalignment between the strategy, structure, and methods by which the DoD and its industry partners attempt to generate technological advantage.

The scope of reform necessary to correct the existing misalignment between the nation’s strategic needs and acquisition policies and processes would require the secretary not only to tackle the innovation challenge described above but also fundamentally reconsider the end-to-end acquisition system. For future success, the DoD will require an acquisition establishment able to respond to the divergent threats the United States faces, ranging from nuclear competition, to conventional conflict, hybrid warfare, and terrorism. This will require a more diverse set of technologies, costing and contracting models, industry partnerships, and personnel than the department currently possesses. 

For the technological innovations generated by R&E to produce true military advantage, the DoD will require a more effective means of transitioning technical breakthroughs into widely deployed military capability.

Creating a more favorable environment for innovation within the USD(R&E) is only one aspect of generating technological advantage. In conjunction, the USD(A&S) must have the mandate, processes, and incentives to incrementally improve the technological standing of the DoD. To be successful, A&S at a minimum will need to commit to modernizing fielded systems, enhancing efficiency, lowering costs, improving sustainment and readiness, and maintaining the health of the defense industrial base. Moreover, for the technological innovations generated by R&E to produce true military advantage, the DoD will require a more effective means of transitioning technical breakthroughs into widely deployed military capability – a task made almost impossible without an appropriately structured and incentivized A&S.  

This approach embodies the spirit of the 2017 NDAA and takes full advantage of the opportunity provided by Congress to rebuild the office of Acquisition, Technology, and Logistics and reimagine the business of acquisitions in the Pentagon. While the NDAA leaves the secretary significant freedom to design the makeup of USD(A&S), it is likely that Mattis will have to request additional support from Congress to implement necessary reforms to the broader defense acquisition system. 

Theory of Change

Aligning the strategy, structure, and methods by which the DoD attempts to generate technological advantage would require the secretary to enable the USD(R&E) to carry out the innovation mission as well as make significant adjustments to the acquisition structure under the USD(A&S). The division of responsibility between the two under secretaries would roughly correlate to the concepts of disruptive and sustaining innovation, as described by Clayton Christensen in the Innovator’s Dilemma. A central concern for the secretary should be establishing the mechanisms by which the two offices would work in harmony, particularly to address the so called “valley of death” between new technologies and operational deployment. Such considerations must factor into organizational design plans – deciding where to locate the Defense Acquisition University, for example, will impact the degree to which newly educated acquisition professionals have the ability to support updated approaches to generating military-technical advantage. 

To effect real change, the DoD will need to establish methods to better link acquisition activities with the National Defense Strategy, such as creating a technology strategy office within USD(R&E). Much work would also be required to change core processes, including those governing the Defense Acquisition System described in the DoD Instruction 5000.02, “Federal Acquisition Rules and Defense Acquisition Regulation Supplement” and the Joint Capability Integration and Development System. Further work would be required to better align these various processes, for example with the Planning, Programming, Budget, and Execution process, and reconsider the makeup of the various decision boards and oversight councils that hold significant power over acquisition decisions. This effort will need to focus on the human factors of leadership, education and training, and performance incentives to avoid unhelpful competition or conflict between R&E and A&S staff and to ensure that the intent behind changes to strategy and process translate to practical outcomes. 

3. The Business Management Problem

A management structure that complicates effective senior leadership, oversight, and accountability.

Secretary Mattis could also choose to address the challenges of military-technical superiority as a subset of a higher order management challenge, identifying the problem as one of management structure for oversight and accountability across the business, technology, and personnel functions of the department. While he would still need to undertake reforms to appropriately establish the USD(R&E) and USD(A&S), Mattis could use this opportunity to address business management challenges beyond technology acquisition, such as the department’s inability to pass a budget audit or the more general lack of necessary innovation within the DoD. The creation of a Chief Management Officer in the 2017 NDAA recognizes that business management operations within the Pentagon require significant improvement. Mattis could seize on that opening to consider consolidating the disparate financial, human resource, information technology, and innovation functions beneath the CMO to improve accountability, integration, and strategic planning.

This level of reform would go far beyond the NDAA, leaving few offices within OSD untouched, and would require the commitment of significant DoD resources and congressional support for additional bureaucratic changes.

Theory of Change

Establishing the CMO as a highly empowered and influential under secretary would require major organizational changes not currently authorized by the NDAA. Under such an ambitious initiative, the secretary could nest existing financial and information technology functions, as well as the new Chief Innovation Officer role (as recommended by the Defense Innovation Board) under the CMO’s purview and consider even more radical moves such as including personnel and readiness as part of the CMO’s role. This would allow the secretary to hold a smaller number of his direct reports accountable to provide more effective oversight of critical core functions; establish cross-functional views of opportunities, problems, and solutions; and create a foundation for the business reforms the secretary has stated he intends to bring to the department.

While there are a wide variety of problems and remedies that Secretary Mattis and his team could potentially pursue in response to the 2017 NDAA, there is a narrower approach that will effectively balance the needs of the department, expectations of Congress, and the resources available to effect change. To best leverage the opportunity presented to him, Secretary Mattis should focus primarily on establishing an effective USD(R&E). This step should be accompanied by dedicated work to identify essential improvements to acquisition policies and processes within USD(A&S) that underscore the objectives of lowering the barriers to starting new acquisition programs, speeding the delivery of capability, and ensuring methods to transition the work of R&E and its service equivalents to deployed forces. During this period, Mattis should signal intent and develop plans for wider business reforms but not seek to make immediate, major changes. Doing so would initiate too much change to manage effectively given the complexities of a transitioning administration and the operational tempo of the DoD.

Achieving early success with acquisition changes has the potential to create the conditions to enable Mattis’ broader objectives as secretary. Improving acquisition will be vital to rapidly and affordably develop the lethality and readiness of the United States armed forces. Showing an ability to shake up entrenched Pentagon bureaucracy will create momentum for the broader business reforms Mattis intends to pursue as part of the FY2019–2023 Defense Program. Most importantly, establishing common goals and a collaborative relationship with Congress will be a prerequisite to delivering any of Mattis’ objectives and minimizing well-intentioned but uncoordinated (and potentially distracting) reform efforts from the Hill.

Notional Organizational Implications Within the Office of the Secretary of Defense

The following charts illustrate notional organizational changes that are a part of the solutions to the problems of military technology innovation, strategic misalignment, and business management. They outline new functions and represent one possible redistribution of existing offices and their areas of responsibility in alignment with notional management structures. These offices could be further split across USD(R&E) and USD(A&S), consolidated, closed, or replaced with new offices and functions as appropriate.

Practical Implementation

Early action will be essential to allow the secretary to generate momentum for positive change in restructuring AT&L. Mattis should commence this initiative by drawing together a cross-functional team of experts comprised of staff already in the Pentagon or those who can be recruited rapidly. This group must be empowered to develop top-down intent on the secretary’s behalf, identifying the specific problems the department will address and a notional concept for change. This action will demonstrate the Secretary’s seriousness on this matter, inform the department’s interim report to Congress on March 1, 2017, and move forward the secretary’s agenda thereafter.

After updating Congress, the secretary should make an associated, public statement of intent to demonstrate that the department intends to undertake meaningful reform alongside mandated organizational changes to AT&L, thereby building goodwill with Congress and sending a message to Pentagon bureaucracy. This could take the form of a speech or a memo, similar to that released on January 31, 2017 Implementation Guidance for Budget Directives in the National Security Memorandum on Rebuilding the U.S. Armed Forces.

In this statement, Mattis should formally announce the individual he has tasked to lead his initiative to publicly imbue that person with the secretary’s authority. The secretary could also release terms of reference for the reform initiative, outlining the nature and scope of work as well as tasking specific individuals in OSD, the services, other agencies, and potentially, academia and industry, to participate in the process.

Recruiting and empowering effective personnel will be critical during the development and execution of the secretary’s plans to change AT&L. Secretary Mattis should give particular consideration to the recruitment strategy for the leaders of AT&L, R&E, and A&S. In an ideal world, the USD(AT&L) would oversee such an initiative, however, it is possible the new under secretary may not be confirmed by this time and even when confirmed will need significant support to assume the responsibilities of a challenging portfolio experiencing unprecedented change. Furthermore, this transition will require particularly creative personnel solutions, such as hiring an under secretary of defense for AT&L, who would be intended to lead R&E, along with a principal deputy intended to lead A&S, to effectively manage the change and create the conditions for a healthy relationship between the new organizations in future.

Following Mattis’ public statement, the cross-functional team will need to engage in a rapid bottom-up review to identify the detailed, desired future state for the DoD’s technology strategy, methods, and organization. This task must include the analysis and consultation required to make wise recommendations on closing, combining, moving, and creating offices within the new USD(R&E) and USD(A&S) organizations. Critically, this analysis must also align with the development of Mattis’ National Defense Strategy and the FY 2019–2023 Defense Program to ensure clear agreement between the department’s higher order strategy and the ways in which it generates military-technical advantage. This task could also serve as an opportunity to seek input from traditional and non-traditional defense industry.

Considering the recent work of Congress, the intent of Secretary Mattis, and the recognition within the Pentagon that the United States is losing its technological edge, it appears that the stars are aligned for real change to the ways in which the DoD generates military-technical advantage.

After rigorous analysis, development, and red-teaming, the department should formally announce its implementation plan in a final report to Congress and request any additional authorities or requisite legislative changes by no later than August 1, 2017. The plan and its announcement should be directed not only to the Hill but also to OSD, the services, industry, and the public. The secretary and his team will need to devise an effective communication strategy to advocate for change with clear directives on how they will enact reforms as well as the roles and benefits for all stakeholders.

Secretary Mattis, or his designee, must also announce an intent to adjust the implementation of their plan based on periodic reviews and lessons learned. An interim review at the time of the transition to the new under secretaries in February 2018 would provide those leaders with a useful analysis of their new organizations. This review should be followed with a more detailed investigation in time to provide input to Congress for the 2019 NDAA, requesting necessary legislative support to make organizational adjustments or implement further reforms. Establishing such intent in advance will provide DoD leadership important flexibility, similar to the wise adjustments Secretary Carter made to DIUx.

Considering the recent work of Congress, the intent of Secretary Mattis, and the recognition within the Pentagon that the United States is losing its technological edge, it appears that the stars are aligned for real change to the ways in which the DoD generates military-technical advantage. But there are myriad external matters that will distract Pentagon leadership from such change and various internal centers of power that will act as roadblocks. Many secretaries have attempted to change the bureaucracy with limited success.

Regardless, Secretary Mattis must make the most of the opportunity presented to him at the beginning of his tenure. Improving how the DoD generates military-technical advantage and closely aligning technology acquisition with defense strategy will be central to the success of his other core objectives. Moreover, if decisive action is not taken in short order, the window of opportunity for change will close, confusion will reign, and the Congress will reasonably return to mandating specific solutions to the DoD from on high.

  1. U.S. Senate, “Title IX – Department of Defense Organization and Management,” National Defense Authorization Act for Fiscal Year 2017, S. 2943, 114th Cong., 2nd sess., https://www.congress.gov/114/bills/s2943/BILLS-114s2943enr.pdf.
  2. “Statement by SASC Chairman John McCain on National Defense Authorization Act Conference Report,” press release, November 30 2016, http://www.mccain.senate.gov/public/index.cfm/2016/11/statement-by-sasc-chairman-john-mccain-on-national-defense-authorization-act-conference-report.
  3. U.S. Senate, National Defense Authorization Act for Fiscal Year 2017, 340–341.
  4. Ibid., 342.
  5. Ibid., 342.
  6. Ibid., 342.
  7. “The DoD must view military-technical challenges as a strategic issue requiring fundamental change. Defining military-technical superiority in terms of acquisition reform, process, procedures, and organizational structure – even though those are critical elements for success – undersells the importance of the challenge.” Ben FitzGerald, Alexandra Sander, and Jacqueline Parziale, “Future Foundry: A New Strategic Approach to Military-Technical Advantage,” (Center for a New American Security, December 2016), 11.
  8. Clayton M. Christensen, The Innovator’s Dilemma: The Revolutionary Book that will Change the Way You Do Business (New York: HarperBusiness, 2000).
  9. “If confirmed, my watchwords will be solvency and security in providing for the protection of our people and the survival of freedoms. My priorities as Secretary of Defense will be to strengthen military readiness, principally by increasing the lethality of force…and to bring business reforms to the Department of Defense by instilling budget discipline and holding our leaders accountable.” James N. Mattis, “Nomination Hearing Statement,” Statement to the Senate Armed Services Committee, U.S. Senate, January 12, 2017, http://www.armed-services.senate.gov/imo/media/doc/Mattis_01-12-17.pdf.
  10. Department of Defense, Implementation Guidance for Budget Directives in the National Security Presidential Memorandum on Rebuilding the U.S. Armed Forces, (January 31, 2017), https://www.govexec.com/media/gbc/docs/pdfs_edit/osd001007-17_final_res.pdf.
  11. Ben FitzGerald and Loren DeJonge Schulman, “The DIUx is Dead. Long Live the DIUx,” Defense One, May 12, 2016, http://www.defenseone.com/ideas/2016/05/ash-carter-diux-pentagon-technology-innovation/128254.


  • Ben FitzGerald

    Adjunct Senior Fellow, Defense Program

    Ben FitzGerald is a partner at Lupa, a private investment firm, and an adjunct senior fellow at the Center for a New American Security (CNAS). At Lupa he leads the firm’s inve...

  • Alexandra Sander

    Former Research Associate, Technology and National Security Program

    Alexandra Sander is a Research Associate with the Technology and National Security Program at the Center for a New American Security (CNAS). Prior to joining CNAS, Ms. Sander...

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