A Pentagon in Transition: Reform and Disruption with Rep. Adam Smith

Lauren Bedula 0:01 Welcome back to Building the Base. Lauren Bedula and Hondo Geurts here recording live from Simi Valley at the Reagan National Defense Forum, and we are just thrilled to have with us Ranking Member Adam Smith of the House Armed Service Committee yet again this year. He helped us wrap up our series last year and shared some really interesting perspectives. So sir, we're very excited to dig in with you today. Rep. Adam Smith 0:21 No, it's good, great to be back with you. I appreciate giving me the chance. Hondo Geurts 0:24 So you know, we talked last year a lot about the industrial base, what has to happen? How do we accelerate acquisition and get capability out there faster? Certainly, a lot of talk and action since last year. What's your thoughts? Are we making progress? We heading in the right direction? Rep. Adam Smith 0:41 We are. It's, it's a good news bad news situation. I mean, the good news is we are making a ton of progress in the basic idea of innovating war rapid. I mean, I, after my morning presentation, I meet with a whole series of companies out here, and I visited a number of these across the country this year. The innovation that's going on, particularly when you're talking about in the drone counter, drone Missile Defense on that space, it's really grown secure communications as well. There are dozens of innovative companies out there making the technologies that we're going to need to for our war fighters to survive and succeed in the fight we face today, and you're seeing more movement towards acquisition we form amongst the Pentagon, the defense contractor community and Congress than I've ever seen. And I think even you know, the Department of Defense is responding to this, the service secretaries, I think, are all very committed to making these changes. I've talked with a number of the last couple of days, so I think all of that's moving in the right direction, but we've got a lot of partisan, political, personal stuff going on at the Pentagon that's that's challenging. It makes the rest of that stuff difficult. Secretary hag Seth is not a uniting figure, as you might have picked up on from his speech at lunch today, and that sort of petty, personal, combative you know, all the people they've fired because of perceived loyalty problems, the doge process that fired so many either fired or the whole fork in the road. We had a lot of talented people. Lee, we're down. I think it's like two thirds of our cyber professional because a lot of them bailed during that process. That's like but a rock thrown on the back of us trying to move this forward. But like I said up front, I think there is a commitment to acquisition reform and innovation that's greater than I've ever seen. Hondo Geurts 2:36 And what are you hearing from a lot of the new entrants or folks that want to enter, are they excited about opportunities to support national security and the startup company? You know, 5, 6, 8, years ago, it was hard to find, you know, excitement in that. Are you on the company side? Rep. Adam Smith 2:55 And the excitement is there. The space has opened up. And, you know, there were some companies Andrew Palantir, who really led. But then you've got dozens of companies, so many different AI companies, shield, ai, c3 AI. You've got companies like, forgetting, a couple of others, that are producing drones, producing weapons, CCA, collaborative combat aircraft, I mean, and they're on their own dime, producing incredibly capable, cost effective systems. So that ecosystem, if you if we've been sitting here eight years ago, and you'd imagine where we're at, it would have been hard to picture. It has just exploded the ecosystem. There is an enthusiasm about producing the products that we need to meet our national security needs and support the world fight. Lauren Bedula 3:44 We started the show four years ago really looking at the role acquisition plays in strengthening the industrial base. And so often we would talk about the balance between culture and authorities and policy. And everyone landed on its culture, right? There are plenty of authorities to leverage. Are you seeing any of that change? I think there's a lot of hope like this point. And we actually talked about it with you last year. It's like to change a system, you really have to break it. Is that? What's happening right now, would you say? Rep. Adam Smith 4:10 As I said, it's all three elements of this piece, you know, I'll just start, you know, through all three. But yeah, the contractor community was previously locked into a model of the big primes, rig requirements process so that they win, then give out subcontracts to the smaller people, so they're all sort of locked in this nice, safe, secure, not terribly competitive ecosystem that has been broken up. And not only do you have all these innovative, new, innovative companies that I've been talking about, but the primes themselves have made major adjustments. I always use this line, and I say this directly to the primes. They don't like it, but it's not that the primes can't compete. It's that they'd rather not okay. If you give them a 1015, year contract locked in, then they're going to be happy they got. Their money can but if they are forced into a system they've been doing this a long time, they can innovate and they can't compete. So I think we're making progress there Congress, you know, God bless Mike Rogers and Mac Thornberry in a bipartisan way. You know, we have really gone after this culture of being on the Armed Services Committee means bring home as much money as much money as you possibly can to your district and take credit for it. We've really moved off of that. The Senate is coming along. I think Roger worker Jack Reed, have been really helpful. On that front. We have a culture within Congress that says we don't want to be the member of Congress who perpetuated the program because it created. We want to be the member of Congress that led in the effort to innovate, to be responsible for these new technologies and make a difference. And then at the Pentagon, you know, again, you got this 5050, thing. We've got a lot of people who are very, very innovative, DEP, sec, def Feinberg, Secretary Driscoll, Secretary Phelan was basically on the Air Force. Secretary's name off top my head, but he's great. They're all headed in the right direction. Duffy, the undersecretary acquisition side, really good. Then you got the SEC def, you know, out there flexing all over the place, and in part, he's also he understands the innovation stuff, but he gets caught up in all this warrior ethos stuff, in trying to purge anyone who might be perceived as disloyal. So we're still 50/50, on the Pentagon, but I think headed in the right direction. Hondo Geurts 6:28 Yeah, we had Congressman Wittman on previously, and we talked a little bit about, you know, not wanting to fail, but not being afraid to learn fast, which may come from failure and and you know, this perception that Congress is would never be willing to accept a failure is something that we've got to continue to work through. And I think the work on the Armed Services Committee is moving in the right direction. Is that your sense? Rep. Adam Smith 6:53 Yeah, well, that's where the partisanship becomes so problematic. And don't get me wrong, I have passionate feelings about President Trump. I don't think he's leading the country in the right direction, and I want to politically defeat his movement. I do. I think it's wrong in his pocket. I want to get into that now. But I also want the system to work all right. I'm not going to take advantage of something just because there's a political opportunity. In my view, President Trump gives me plenty of political opportunities that don't have to jeopardize what we're doing here, that I don't have to every time something goes wrong, you know, act like it's their fault, and they've done the worst thing in the world. So we're getting there, but the partisan environment does make it more difficult. It's on both sides. I mean, I will say that I think the Republicans are more aggressive about that. If anything goes wrong, when a Democrat is president, they act like it's the greatest tragedy in the history of the world. No, my God, blah, blah, blah, blah, blah, but both sides are more partisan than they should be. So we do have to work through that, because you correctly identify where it's most problematic. If we're going to tell DoD innovate, go out there, take chances, don't stick to the process of requirements. Something goes wrong, and you got a bunch of Democrats, because it's a Republican hauling this person in and screaming about it, or a bunch of Republicans, or Republicans and Democrat, then you're going to disincentivize what we're trying to get. We got, we still have work to do on that front. Lauren Bedula 8:19 As far as the industrial base goes we had this conversation last year. Talked about the importance, but really it's a theme throughout the conversations today, and we often think that the folks that are here a little bit reflective of how that ecosystem is changing and evolving. A lot of people are pointing out that this year, Jamie Dimon's here. It's pretty interesting to see what's your take on last year versus year, and the tone you're hearing from industry as it relates to the industrial base? Hondo Geurts 10:38 Yeah, I think, you know, for a while the debate was, how do we go from, you know, 100 of pick your weapon a year, to 200 now you're hearing, yeah, going from 100 to 10,000 which is a fundamentally different you can't just even if you had the capacity, you don't have the money, to build that exquisite thing. How do you shape that out? Rep. Adam Smith 10:57 I think part of that, sorry to interrupt, but I think part of that also is under also is understanding what deterrence is going to look like. And I think imagining a world where we can build enough defense systems to so dominate China that they don't dare do anything, I just, I don't see that as a realistic expectation. So that's why, and I will say that the one part of Secretary hags best speech that I agreed with was the notion that we need to figure out how to deter China without being needlessly confrontational. We need to figure out how to coexist with China. They're not going we're not going anywhere. As I said this morning, how do we make that work? And I would be adamantly opposed to a strategy that says, No, if they build 1000 ships, we got to build 2000 if they, you know, we just don't have the capacity to get into that type of arms race. We need to view deterrence, sorry, as a as a broader thing that is about dialog. And I totally agree with we should be talking to him. I was in China two months ago, led the first congressional delegation there in six years, because I believe in that we had a whole bunch of high level meetings with a very frank back and forth discussion to get to that place. So I think we need to keep that in mind as well. Lauren Bedula 12:14 Roger Zach, I mentioned that trip earlier today when we were chatting, any takeaways from that that you can share with the listeners? Rep. Adam Smith 12:19 Yeah, no, I think the biggest one is China has changed a little bit in the last couple of years. They're less belligerent than they used to be. And don't get me wrong, I'm not implying that suddenly they become friendly and everything's fine, but when you look at where they were a couple years ago, basically imagining a world where they were the preeminent power and were driven, you know, into the ground somewhere, they've kind of, I think, been humbled a little bit by some of their economic problems, you know, the property debt bubble that they had burst their unemployment over manufacturing problem. And I think they now see that they're going to need to be more of a cooperative partner in the world. Long way to go on that they were open to the conversation. Now, I think the best way to think about it, and some of the discussions I had with the defense minister, Foreign Minister, the premier, as well, was the international rules based system that we built in the 40s, 50s and 60s. Well, we're in a different world now, you know, and China is a different country. And it's not wrong for them to say, Yeah, we should perhaps revisit these rules. But my big point was, okay, well, finally visiting them. But understand, as the cliche goes, with great power comes great responsibility, and you think it's been easy being the dominant power in the world for the last 80 years, it hasn't. So you have to be willing to play by some rules if you're going to move into that. So I think there's a willingness to start that discussion. I want to give a shout out to David Perdue, the ambassador, brilliant guy, doing a fantastic job. He's an incredible team over there. You know, I think they're the China's willing to engage in that dial. We are miles away from resolving all of those issues that I just raised, but we're in a different place than we were a couple years ago, when China was like, Screw you. We will bury you, basically. Now they're willing to at least have the dialog, and so are we, because we've engaged in some pretty, you know, intense rhetoric, shall we say, and we even have some of it this morning. So I think we're getting closer to the idea, hey, we're both here. How do we coexist? Let's talk. Lauren Bedula 14:19 Fascinating. And have you seen any other shifts in the net, the threat landscape, national security threat landscape, for better, for worse, since we spoke last year? Rep. Adam Smith 14:28 To be honest? One of the biggest shifts is the weakening of Iran. That's a huge positive. No, I think Israel deserves the bulk of the credit for that, but certainly the US was supportive throughout the Biden presidency as well, as well as Trump. But the weakening of Iran's position in the world and the shift in the Middle East, as you see, Assad's gone, Syria has a chance to be a more stable, less extremist government, Lebanon, Hezbollah, substantially weaker. It has a chance as well. We can develop those governments. Governments in Lebanon and Syria be a huge change. And then in Gaza, if the ceasefire can hold, and if Gaza can be rebuilt in the same way, that's why I'm really worried that Israel continues to bomb Lebanon and Syria and Gaza, you know, and bragging about, oh, peace in the Middle East, they're still dropping bombs on people. We have miles to go before we get to that place, but I think that's been the biggest shift. Yes, the second thing is the degree to which Russia's ambitions in Ukraine continue to be thwarted, and I hope that continues, and I hope we do get to some sort of peace agreement. Lauren Bedula 15:34 And thank you for that. We don't often ask that question, but it's so helpful for our industry listeners to hear as they think about developing their product roadmap or product market fit, and it's kind of different side of that conversation. We talked about just global dynamics. A lot of industry is navigating the sense of de globalization right now. Any thoughts about that? Rep. Adam Smith 15:52 It's a challenge to the supply chain. I mean, that's the biggest thing. Obviously, covid really kicked it off. But then concerns about China becoming too dominant and too many industries have contributed to it, the sanctions on Russia after Russia's invasion in Ukraine, and all of that has has really boiled the global supply chain. And as I said this morning, I really hope people will push harder on the idea that the tariffs are not working and they're not helping us, certain they're driving up prices for us here domestically, but they're also pushing away potential partners, like India, like Brazil, countries that are going to play a crucial role in what the new, you know, rules based international system looks like, you know, and it's also undermining our ability to de risk from China. I always say I'm a de risker, not a decoupler, but to de risk you can't be slapping tariffs on Vietnam and Malaysia and Thailand and Mexico, because that's where you want some of these things to go when they leave China. And I literally know manufacturing businesses that have been getting ready to leave China, who stayed because they were headed was in just as disadvantageous a position as China. So we need to really rethink that tariff strategy, and we're going to get there. Hondo Geurts 17:03 Yeah, I think last year we also talked some on workforce as part of this re industrialization, reshoring and all that. Certainly in your your area, you've got a very dynamic workforce has gone through a lot of these changes in the industrial base. Well, what's your sense on are we making progress in that area, or is that now that we've kind of decided we want to move this direction, kind of one of the next key things we've got to really put attention to. Rep. Adam Smith 17:29 We're making some progress. We need to make more. I mean, we really need to emphasize a career and technical education. You know, not just sending everybody off to get a four year degree and whatever, but really focusing on skills development, I think we've made a lot of progress on that. Be the economics, you know, all the money we're pouring into higher education right now that isn't necessarily getting a return. We need to still shift more of that. One thing, the one thing that I liked about the reconciliation bill was that it allowed access to Pell grants and other, you know, federal higher education support or skills development and workforce development training, not just higher education, undergraduate type stuff. So I think that that's a positive in that direction. The other big thing that has changed in the last year is AI, and you know, how much of the needs that we have for workforce development can be met by bots and AI. They always talking with Andrew today, and you know, they've got, you know, something that can really help speed up the number of submarines that we can make a year that is very heavily dependent upon software and robots. So we need to train the workforce and also take advantage of technology and get us, yeah, that's great. Hondo Geurts 18:46 You know, in your area, also got a pretty thriving startup community by bringing lots of things. When they come to see you and they say, Hey, Chairman, we'd like to, we, you know, we want to be in defense. We want to, what kind of advice would you give them? Or a founder who's thinking, you know, I want to support the nation, I got a great idea. Any, any advice you would give them, you know, other than it's going to be a little bit of a long journey. Rep. Adam Smith 19:11 And I think most people who are, you know, starting up a business, any whether it's a DOD focus or elsewhere, they're aware the odds and the challenges. But that was, you know, so the culture of Silicon Valley in positive sense, was, you know, we're gonna have a bunch of ideas. A bunch of them are going to fail, but that we're going to learn from that, and the ones that succeed are going to get us there. And I think they already have that on innovation DOD, I would encourage them to build the relationships with the Department of Defense along the way, so that they know what DoD is looking for. And I would also say it is a it is a good time to be doing that, because we need to innovate. And there are so many companies. And I think the one of the cool lines I forget who said it was saying that, you know, when this Reagan defense forum started, probably two thirds of the companies that are sponsored. Area today didn't exist, all right, so it's been a robust time for innovation, if you got an idea, particularly if that idea centers around, well, space, any aspect of it, secure communications, drones, counter drones, missile missile defense, you're probably going to get a welcome ear from DOD. Lauren Bedula 20:20 Well, it's been a tradition to have you on stage to kick off the day at the Reagan National Defense forum, and really you set the tone, I think, for a lot of the conversation. So we're honored to have had you as we close out the day for a second year in a row, and we'd love to make that a tradition as well, but say we're sitting together in a year from now, recording. Do you have any predictions or aspirations for the next year? Aspirations? Rep. Adam Smith 20:42 Yes, not predictions, as the joke goes, the future is notoriously difficult to predict. No, I think the aspiration would be that all three legs of the stool, the defense industrial base, DOD Andres, continue to move forward with the acquisition reform and innovation agenda for the Department of Defense. I think the second thing would be that the Trump administration finds its footing, you know, and leaves behind some of the vengeance aspect and really focuses on a worldview that matches up. Because the one thing I agree that we failed after the end of the Clothier now, I don't agree with the sarcastic, degrading way Secretary hagsothe laid it out today. We've got a lot of really smart people who are dealing with tough problems, all right? And this, this Trumpian tendency. Well, if I was in charge, everything would be fine, yeah, the Ukraine war, it ended 24 hours after Trump became president, right? Oh, shit. No, I did. You know, I mean that sort of bravado, chest bumping, belittling other people, doesn't have a place. But it's absolutely clear that our notion after the end of the Cold War, that we would live in a unipolar world for some extended period of time and we could spread our will across the globe was misplaced. Now I think it was understandable in a way that Secretary hag said doesn't understand, but moving past that is absolutely right. We need to have realism. But I'm sorry I tried to do this quickly, but Secretary hags doesn't understand what realism is. Realism is the United States of America believes in liberal democracy and pluralism. We believe in the basic idea that people ought to have a say in how they're governed. They should be treated fairly. We should be governed by the rule of law, not by strong man. Rule shouldn't be any one person. It should be Law and Rules, rules based international order. Ideas should be judged on how good the ideas are, not by who has them. We believe in that, but realism says but we can't impose that on the rest of the little we're gonna have to make choices and compromise. We're gonna have to work with people who don't necessarily live up to our ideas. Realism isn't what we heard today, which is, screw those ideas. They're in it for themselves. We're in it for ourselves. Let's go. Let's see who wins. That's 19th century. That's what led to World War after war and very nearly extinguish the plan. So I'd like to see us get back to real realism, if you will, that doesn't sacrifice American values and really focuses on the US playing a positive well. Lauren Bedula 23:13 Ranking Member, Smith, again, we know how busy you are, and you're in high demand this day, this busy day here. Thank you for coming on the show again and sharing these insights. We really appreciate all the work you're doing in this space. Rep. Adam Smith 23:23 Yeah, thanks for doing this. Appreciate the chance. Hondo Geurts 23:24 Awesome. Transcribed by https://otter.ai