Administration, Congress Undermine Health Of The Defense Industrial Base

The Obama Administration’s new defense strategy envisions the reshaping of the U.S. military to reflect changing geostrategic challenges, emerging threats and new technologies. It will not be enough for the Department of Defense merely to shed irrelevant, excess and obsolescent systems and organizations. It will have to invest in a host of new capabilities while simultaneously struggling to ensure that the overall force is maintained and upgraded. In order to maintain, “our military superiority with armed forces that are agile, flexible and ready for the full range of contingencies and threats,” to use the President’s own words, the Pentagon will be need a healthy, innovative and responsive defense industrial base.

However, both the administration and Congress have taken steps that will weaken the defense industrial base, reduce its capacity for innovation, limit its ability to surge in the event of a greater-than-expected threat and even increase costs to the government at a time when defense budgets are projected to shrink significantly. Industry associations and independent think tanks have repeatedly warned that the world-class status of the U.S. defense industrial base is at risk.

Over the past three years, the administration has imposed new and onerous policy, regulatory and contracting burdens on private defense companies. It expanded the definition of inherently governmental functions — those that can be performed only by government employees. DoD took this even farther, pursuing a policy of insourcing to the public defense industrial base work that had long been conducted in the private sector and did so based, in many cases, on murky business case analyses. In addition, the Pentagon instituted a new acquisition strategy that increased the private sector’s costs of doing business while simultaneously injecting more uncertainty into the process. The greater use in the source selection process of standards such as “lowest price, technically acceptable” threatens to dumb down the workforce and discourage companies from making investments in infrastructure, equipment and even research and development. Ironically, at the same time that it is aggressively pushing for increased competition among the prime contractors, DoD is doing very little to ensure greater competition for subsystems, components and parts, particularly in maintenance, repair and overhaul.

To make matters worse, Congress also took steps which will make it more difficult for private defense companies to operate successfully. The recently enacted 2012 National Defense Authorization Act (NDAA) expands the role of the public defense industrial base at the expense of the private sector. For example, it requires DoD to establish an “appropriate mix” between military, civilian and private contractors while mandating that cost not be the primary consideration in rebalancing the workforce. The NDAA significantly broadens the definition of depot level maintenance by adding all aspects of software and eliminating exclusions for special access programs. It also expands the definition of core by including now “critical functions,” “associated logistical capabilities,” and technical data. Since the NDAA maintains the protected status of the public defense industrial base under the requirements for core and “50-50,” the results can only be a reduction in the maintenance and sustainment work available to private companies.

If the administration and Congress thinks it can mistreat private industry without consequences they are sorely mistaken. The responses can be as straightforward as closing inefficient facilities as Boeing recently did in Wichita, Kansas or as consequential as exiting the sector. Unfortunately, what is more difficult to observe is the pernicious effects on the healthy and international competitiveness of the U.S. defense industrial base that results from private companies cutting back on investments in people, processes and technologies in response to an increasingly hostile business climate. In addition, recent actions by the administration and Congress make it less likely that potential new players will want to enter the defense sector.

If the administration wants a leaner and more agile military it will require a defense industrial base with similar characteristics. Current policies and laws virtually guarantee that this will not happen.