It’s Time For The Army To Accept Necessity Of An Industrial Policy

The Department of Defense (DoD) likes to pretend it does not really have to pay attention to the defense industrial base or to develop an industrial policy. It holds firmly to the fantasy that when the government waves money at the private sector the latter will respond rapidly and effectively. The Pentagon also seems to believe that its erratic behavior has no significant consequences for the industrial base. Thus, it repeatedly alters acquisition policy, adds mountains of regulations and reporting requirements to an already overloaded system, changes its mind on quantities of goods and services at a drop of a hat, introduces new requirements to platforms that are already being built and starts, stops and restarts programs all without consideration of the impacts of its inconsistencies for the private sector. Acquisition officials often complain about the profits defense companies earn even though the average rate of return for the top 20 defense companies is one fourth of that achieved by the top 20 commercial companies.

This history of DoD’s poor decisions with respect to the defense industrial base goes back decades. So it should not have come as a surprise when, as part of its fiscal year 2013 budget submission, the U.S. Army proposed mothballing the two crown jewels of its armored vehicle industrial base: the M-1 production line at Lima, Ohio and the Bradley Infantry Fighting Vehicle production line at York, Pennsylvania. The Army believes that it will cost less to halt production on those two lines for up to three years than it will to continue their operation at a minimally sustainable rate.

There are so many problems with this proposal it is difficult to know where to begin. Past attempts by the Army to shut the M-1 line foundered on poor estimations of the costs and problems associated with a shutdown and restart. The same is likely to hold true today.

Take the proposed three year closure of the Bradley production line. Not only are there costs associated with mothballing the production line but major restart expenses as well. One estimate suggests that it will cost over $750 million to restart the line. In addition, the Army apparently has not factored in the impact of closing the major production line at the York facility on the other products produced there, the M-88 recovery vehicle, Paladin howitzer upgrade and the future ground combat vehicle (GCV) and armored multipurpose vehicle (AMPV).

More significantly, it will take approximately 30 months to return the line to production because of the requirements to re-qualify and certify the industrial base, retrain workers and procure long-lead items. It takes up to three years to train a skilled worker or manufacturing engineer in the unique skills required to produce armored fighting vehicles. This lengthy process is a consequence, in large part, of the unique requirements imposed on defense companies by government regulations, technical specifications and reporting requirements. So, just six months after a closure starts, the process of restarting the line (and the costs associated with restart) will have to begin. In the end, the three year shutdown is likely to cost the Army more than it will save.

Since the end of the Cold War, the defense industrial base has been reduced to a small number of critical facilities for major platforms and weapons systems. These facilities and their skilled workforce need to be treated as national treasures. DoD needs to accept the reality that it is time to develop an explicit industrial base policy. The Army needs to do the same with respect to its critical production facilities.