Army calls on industry for joint-funding ideas in bid to ‘de-risk’ investments, increase production

Facing a $150 billion infrastructure backlog and congressional appropriation caps, the Army is looking to make private industry an interesting offer: co-invest in its priorities and get a return that isn’t solely reliant on the service itself.

Dubbed the “Strategic Capital Initiative,” the Army is asking industry to help come up with ideas for new public-private partnership structures, operating models and contracting processes that can quickly tackle some of its most pressing demands, according to service leaders and a request for information.

Through this effort, the Army is hoping to “de-risk” initial private investment by not only being a reliable funder, but by co-backing ventures that could benefit industry’s commercial customers. 

Dave Fitzgerald, the Army’s chief operating officer, cited the billions in infrastructure backlog and appropriated funds, of which “there’s just not enough to go around,” as primary catalysts for the initiative.

“The ask to industry is [to] help us solve our problems,” he told reporters last week. “But in a way where they can get return on their investment that is not reliant solely on the Army as a customer, because then you ultimately come back to the appropriated funds issue.”

“I do think we can save a lot of money, I know for a fact that we’re never going to be able to dig out of our current infrastructure backlog without a different approach,” Fitzgerald said. “I think how much remains to be seen, but I am optimistic.”

Jerry McGinn, director of the Center for Strategic and International Studies’ industrial base program, said that while public-private partnerships are not new over the last 10 to 15 years, some have been distinct and “maybe novel.”

“It’s not just the government money, but you’re getting private sectors leveraging their expertise and their experience and their best practices and their resources to achieve national security objectives,” he said. “So it’s a way of achieving that security objective without using exclusively appropriated congressional funds.”

That said, there are still risks to industry in these partnerships if projects turn out unsuccessful, according to McGinn. When projects are funded solely with congressionally-appropriated money, the “responsibility is a lot clearer.” And as government priorities change or deprioritize, the question becomes “what do you do with that investment made by the company?”

While the request is broad, the Army identified six areas it wants industry to help solve under this partnership: energy resilience and dominance, the organic industrial base, logistics and supply chains, real assets and facilities utilization, advanced manufacturing and technology adoption, and critical minerals and resource development.

“We’re looking for models that present a diversified customer base, because I think that de-risks it for the taxpayer as well as it de-risks the investment for industry,” Fitzgerald said. “Certainly, we are looking to de-risk the initial investment, either by becoming a long-term partner through a co-investment model, or signing up as an anchor customer for things that we know that we need, that align to one of these six areas.”

The Army also expects this effort to help iron out supply chains for resources, some of which can be used for small drones, but also “the motors that make your car window go up,” he added.

Fitzgerald cited the Infantry Squad Vehicle as an example of commercial manufacturing supporting a military objective. The ISV, a lightweight troop carrier, is composed of roughly 80% commercial parts, which can also be applied to some Chevrolet trucks.

“Our organic industrial base can become a subtier supplier back into the commercial market for automotive parts — that’s just like one example,” Fitzgerald said. That partnership helps the Army save money and get a product it needs. It also provides “more steady workflows, some more predictable labor hours and all that, but it also allows us to kind of upskill our workforce at the same time as we’re kind of working in some of these joint partnership models.”

The request is open until April 2 and the Army expects respondents to present a “clear path” to how co-investment opportunities would work and where the service could act as long-term partner, without needing it as a lone source of return on investment.

“I can’t sit here and tell you exactly how much we’ll save, but I know that we’re not going to get the capabilities we need in the times we need them to our warfighters without a different approach,” Fitzgerald said.