SpaceX and Palantir came to Washington expecting a receptive audience for what they presented as game-changing new products.
Instead, the California companies have become mired in Capitol Hill drama.
They’ve made enemies of big-name defense contractors. They’ve locked horns with their government customers. And they’ve refused to play by the unwritten rules of federal contracting.
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Their battles have put on display a striking culture clash: the Silicon Valley startup mentality, in which disruptive technologies quickly win consumers, versus Washington’s inside game, mastered by long-established companies with deep government connections and knowledge.
And if there’s a No. 1 understood rule for those seeking to sell to the government, it’s this: Don’t sue your customer.
SpaceX, founded by billionaire entrepreneur Elon Musk, broke that rule in April, when the company sued the Air Force to reopen a lucrative satellite launch contract awarded to United Launch Alliance, a joint venture of two of the biggest defense giants: Lockheed Martin and Boeing.
Palantir hasn’t filed a lawsuit, but its top advocate in Congress has forcefully accused the Army of making it difficult for soldiers in Afghanistan to get their hands on its intelligence software.
The companies’ public battles have raised questions in the industry and on Capitol Hill about the Pentagon’s procurement system, which is regularly criticized but rarely changed, and have highlighted the significant role Congress can play in settling these kinds of disputes.
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“They were very aggressive,” said one defense lobbyist, discussing the issue on condition of anonymity. “They didn’t navigate the process correctly in the beginning and made a lot of enemies.”
SpaceX and its Washington backers say they had to be aggressive to shake up the Pentagon’s massive and staid acquisition system.
Indeed, former Pentagon procurement officials say there’s a high barrier blocking new entrants from government work, including lengthy regulations and stringent accounting standards.
Brett Lambert, the former director of DOD industrial policy, said commercial companies have tried to sell to the Pentagon only to give up after running into the byzantine Pentagon procurement system.
“The problem you have is an institutional problem,” he said. “Those of us who wanted to open up and take advantage of commercial capabilities, sometimes you may find you’re leading and looking behind you and seeing that nobody’s there.”
Jacques Gansler, a former Pentagon acquisition chief, said the system is simply averse to change. “Large institutions naturally have more resistance,” said Gansler, now a professor at the University of Maryland and a ULA consultant.
Pentagon officials have long said they want to encourage competition, including companies they might not regularly work with.
“I like competition, and I think there is now a global marketplace out there,” Frank Kendall, the Pentagon’s chief weapons buyer, said in a speech last year. “We don’t have a monopoly on good ideas, and we’re open to competitors.”
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