Cheap drones will soon be equipped with artificial intelligence, boosting their effectiveness. This improvement represents an opportunity for the U.S., which has superior AI engineers and a wide global technical lead over the rest of the world.Unfortunately, the Pentagon hasn’t adapted. The nation is facing a capital squeeze, with debt service set to exceed the defense budget, but the military is also paralyzed by its obsolete business model. Most of its procurement budget is rigidly dedicated to a defense oligopoly that can’t produce at low cost.
The military has expressed some interest in producing cheap AI drones. The flagship effort is called Replicator, capitalized with less than 0.2% of the defense investment budget. Replicator’s self-described “poster child” is a loitering bomb that is estimated to exceed $100,000 to build. There aren’t sufficient funds to mass produce at that price.
Change will require three steps. First, the defense secretary must insist that a million cheap AI drones are vital, as former Defense Secretary Robert Gates did when he declared “war on the Pentagon” to spend more than $40 billion on armored trucks. Drone scale can be achieved by shifting $20 billion over three years to new entrants.
Second, reallocation must be guided by an investment committee. This is standard procedure in major corporations, and the secretary of defense has an in-house equivalent, led by the Cost Assessment and Program Evaluation office. The problem is, the military doubts CAPE’s ability to optimize the portfolio, and Congress is openly hostile. CAPE must be empowered to make strategic decisions.
Third, Congress must authorize the secretary of defense to pivot on spending. Modern enterprise management is stymied by more than 1,000 regulations added since 9/11. Congress has additionally upended the budget with more than 50 continuing resolutions since 2010, creating a “use it or lose it” environment that handicaps new initiatives.
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