Doug and Mark,
Not only is agile feasible, it is already in use in many forms. Starting 2002, Lockheed Martin applied eXtreme Programming to the Atlas-V embedded flight control systems. A paper was presented at the SEI CMMI conference in Denver. I have a copy if you want.
Many aerospace and defense contractors use iterative and incremental development processes embedded in Rolling Wave program management. Rolling Waves, incremental "drops," emergent requirements are built into the DoD procurement processes in the form of the Integrated Master Plan / Integrated Master Schedule paradigm.
Here's a briefing http://slidesha.re/mq37vD on how to integrate agile with the FAR/DFARS procurement processes. It's the procurement processes that need to change. Ignoring the need to have credible agile processes in place. As well, Earned Value Management from the FAR/DFARS flow down ANSI-748-B Guidelines must also be in place.
Much has been written on how to do this, but care is needed:
- Procurement guidelines come first, not agile development - you're spending the public's money.
- Program performance meassured in Earned Value comes next (if applicable).
- The management of capabilities and the derived requirements (all requirements are derived BTW), must be done with ruthless control. The open ended style of commercial software development has limited appeal in the DoD. There are instances where this is applicable, but most programs have a fixed "launch" date, with a fixed set of capabilities.
- There must be a "master plan," similar to the Epic concept, where the needed capabilities are defined in enough detail to recognize them when they appear. From there releases, and the iterations within those releases fit nicely into the IMP/IMS procurement framework of DoD 5000.02.
It can be done, but rarely is it successful by trying to displace the existing processes - as is common in the commercial world. There are efforts underway inside DoD and the NDIA (National Defense Industry Association) for deploying agile methods for enterprise IT. The NDIA C4ISR group is where this effort takes place.