Breaking the Cycle: How Government Contracting Stifles Innovation and Wastes Billions

By Lee S. Gliddon III, Executive Vice President at Knowledge Relay, Inc.

Government contracting is supposed to deliver the best solutions at the best value for taxpayers, yet its outdated procurement processes achieve the opposite. Instead of fostering innovation and efficiency, the current system is designed to preserve the status quo—protecting entrenched players, discouraging fresh ideas, and inflating costs.

A System Built to Prevent Innovation

When the U.S. government issues a Request for Proposal (RFP), it doesn’t just define the problem; it dictates the solution. RFPs specify how the work must be done, including rigid resource and staffing requirements. This approach makes price the primary differentiator, rewarding incumbents and “job-shopper” firms that maintain the same processes and personnel year after year, making improvement impossible.

Meanwhile, smaller, more innovative companies—those providing cost-saving automation and efficiency—are frequently disqualified as “non-responsive” simply because their proposals don’t align with outdated requirements. Instead of encouraging competition and progress, the system shuts out new ideas before they even reach the table.

The High Cost of Inefficiency

The consequences of this procurement model are enormous: bloated budgets, project delays, and declining competitiveness. While private industry continuously adopts new methods to cut costs and improve efficiency, government contracts lock in expensive, manual processes which should have been automated long ago.

Take Project Controls as an example. In commercial industries like energy, companies such as American Electric Power use automation to track project progress, reducing costs and errors. Yet many government contracts still mandate manual calculations, requiring armies of contractors to perform tasks that could be done more efficiently and accurately with software. Worse, the government layers on unnecessary reporting requirements, further inflating costs without adding value.

This waste is even more evident in U.S. Navy shipbuilding and maintenance, where outdated project control methods contribute to massive overruns and delays. The USS Enterprise (Ford-class aircraft carrier) is 18 months behind schedule, while the Constellation-class frigate program is three years delayed according to National Defense Magazine. By adopting best practices from commercial nuclear operators—who lead the world in minimizing downtime and maximizing efficiency—the Navy could save billions and increase fleet availability. Instead, it continues to prioritize the same costly and ineffective approaches, ultimately weakening national security, while those proposing to adopt better solutions are disqualified.

The Revolving Door: Who Really Benefits?

Why does the government persist with these inefficient practices? The answer lies in the powerful incentives that keep the system in place.

Senior government officials routinely leave their posts to take lucrative jobs with the very defense contractors they previously oversaw. The numbers tell the story:

• 15 retired four-star generals and admirals joined small and mid-sized arms contractors, while five went directly to top defense companies notes the Quincy Institute. Others became consultants, lobbyists, or investment advisors in the defense sector.
• A 2019 Government Accountability Office (GAO) report found that in just three years, 102 former generals, admirals, or senior civilians had been hired by major defense contractors, including Northrop Grumman, Lockheed Martin, and Raytheon.

While not illegal, this practice creates a built-in bias favoring established contractors. Large firms—often staffed by former military officials—secure massive contracts with little incentive to innovate or cut costs. Meanwhile, smaller, more agile companies struggle to break in, no matter how superior their solutions might be.

Falling Behind: The Cost of Stagnation

The consequences of this stagnation extend beyond wasteful spending. The failure to adopt cutting-edge technologies is putting the U.S. at a strategic disadvantage.

China has surged ahead in 37 out of 44 critical technology sectors, including hypersonic weapons and advanced materials, according to the ASPI Strategic Policy Institute. Unlike the U.S., China embraces rapid technological advancements, integrating new ideas into defense and infrastructure at an aggressive pace. In contrast, the U.S. government’s bureaucratic procurement model actively resists innovation, making it harder to maintain a competitive edge.

The Path Forward: Restructuring Government Contracts

The solution is clear: the government must modernize its contracting process to encourage efficiency and innovation rather than entrench outdated methods. This means:

• Focusing on outcome, not headcount. Contracts should reward the best results—not the number of employees assigned to a project.
• Embracing automation and private-sector best practices. Proven solutions from industries like energy, aerospace, and tech should be adopted to streamline operations and cut costs.
• Ending the revolving door culture. Stricter regulations should prevent former officials from immediately joining defense contractors, ensuring procurement decisions prioritize national interest over personal gain.

If the U.S. government were to integrate commercial best practices, it could save billions—if not trillions—in operational costs. More importantly, it would maintain the nation’s competitive edge by fostering innovation instead of suppressing it.

Without change, the U.S. will continue down a path of inefficiency, wasted resources, and diminished global leadership. The time to break the cycle is now.