How to Cross the Government’s ‘Valley of Death’ and Fix How It Spends Billions on Stuff

A very big ax may soon fall on the federal government.

Elon Musk and Vivek Ramaswamy will lead a new Department of Government Efficiency in Donald Trump’s incoming administration. The two said they aim to cut at least $500 billion from the federal budget and that mass layoffs and “deleting” entire government agencies are on their agenda.

But there is another way their band of “small-government revolutionaries,” as a post from the planned department on Mr. Musk’s X platform put it, can save taxpayers a bundle in the long term while providing better services. The two should modernize how the government buys goods and services from private vendors, which receive roughly one in 10 dollars spent by the federal government. Too often, that money is spent on delivering last year’s or even the last century’s technology.

Mr. Musk and Mr. Ramaswamy said the federal government’s procurement processes are “badly broken” and have called for large-scale audits on contracts that “have gone unexamined for years.” The two are right, in one respect: Federal procurement is, for the most part, dominated by companies with long histories of doing work for the government.

What’s needed is structural reform to enable the government to buy from start-ups more effectively while maintaining good-governance principles of transparency and accountability. If it’s done right, the government can even use its purchasing power to spur inventions — an approach Mr. Musk should know well. Government demand helped create the commercial space industry, in which his company SpaceX now dominates.

The problem is that working with early-stage companies on novel solutions runs contrary to the layers of risk protection built into the government’s byzantine procurement processes. Recent experiments with procurement reform in California and New York are showing how the government can do a better job of supporting new ideas and keeping pace with technology, in fields such as artificial intelligence and climate change.

First, a quick tutorial on how government contracting usually works:

Contractors compete for government business by responding to requests for proposals that outline the details of projects and products the government wants to buy. The government identifies the solutionit is looking for, codified in a prescriptive set of performance requirements. Typically the winner is the vendor that meets the government’s specifications at the lowest price. In choosing the winner, the government looks at a vendor’s history of doing business with the government, tending to favor more established companies.