Trump's Musk-led efficiency drive may spur defence-tech partnerships

CALIFORNIA, Dec 09 (Reuters): President-elect Donald Trump's planned US government efficiency drive involving Elon Musk could lead to more joint projects between big defence contractors and smaller tech firms in areas such as artificial intelligence, drones and uncrewed submarines, according to interviews with company executives.

Musk has indicated that Pentagon spending and priorities will be a target of the efficiency initiative, spreading anxiety at defence heavyweights such as Boeing, Northrop Grumman, Lockheed Martin and General Dynamics.

Smaller military technology companies such as artificial intelligence software firm Palantir and drone-maker Anduril have been buoyed by the prospect of Musk further loosening the grip that defence giants have held on the Pentagon's budget for many decades.

Participants at the Reagan National Defence Forum, a summit in Simi Valley, California, that brought together corporate executives, US military leaders and lawmakers, said they expect smaller tech firms to play a bigger role given that Musk, one of their own, is entering a position of enormous influence.

Musk and many small defence tech firms have been aligned in criticizing legacy defence programs like Lockheed Martin's F-35 fighter jet while calling for mass production of cheaper AI-powered drones, missiles and uncrewed submarines. Such views have given major defence contractors more incentive to partner with emerging defence technology players in these areas, some having strong personal relationships with Musk and his companies such as SpaceX and Tesla, according to executives at technology and big defence firms.

One senior executive at a top defence contractor, speaking on condition of anonymity, told Reuters that contract negotiations by his company with smaller military tech providers have been "on steroids" since Trump's Nov. 5 election victory. The amount of money available for the newer defence companies might be limited, however. Less than 20 per cent of the Pentagon budget buys weapons systems and, historically, only around 1 per cent goes to brand-new program purchases like those being offered by these young market entrants, according to Tara Murphy Dougherty, CEO of defence acquisition software company Govini.

These emerging firms could benefit from teaming up with the big legacy contractors if the newer companies want to quickly scale production of new weapons and deploy new technology platforms in the field, according to executives at the summit. "What we're locked into is a current worldview in defence that everything is zero sum. If you're growing, that means I'm shrinking. I don't think that's true," Shyam Sankar, Palantir's chief technology officer, told Reuters on the sidelines of the two-day summit, which ended on Saturday.

"We need to help the Primes," Sankar said, referring to the big legacy contractors, "once you get past a zero-sum mindset, that actually everyone can be better off."

In a potential sign of things to come, Palantir announced on the eve of the summit a deal to partner on defence AI with Booz Allen Hamilton, a 110-year-old military contractor.

Trump, who takes office on Jan. 20, named Musk and Vivek Ramaswamy, the founder of a pharmaceutical company, on Nov. 13 as co-leaders of a government efficiency initiative intended to slash government spending, dismantle federal bureaucracy, cut regulations and restructure agencies.