Defense Secretary Donald Rumsfeld recently noted that the decline
of the nation’s defense industrial base is a "very serious
problem." One major challenge confronting the industry, he
explained, is that it has not fared favorably on Wall Street, thus
failing to attract investors. But unlike other industries that can
afford to fail, the defense sector is critical to the security of
the United States and must be financially healthy.
"The government doesn’t make things," he said.
"We purchase things, we acquire things, and that industry has
to be there. And to be there, it has to be viable from an economic
standpoint or people are not going to invest in it. It is a very
serious problem."
Certainly, we agree with Rumsfeld’s thoughts, not only because
he is the Defense Secretary, but because he has extensive experience
in private business, in the legislative and executive branches of
government.
Given Rumsfeld’s viewpoint about the defense industry, it
would seem timely to offer a few suggestions on improving the state
of the base:
First, the defense industrial base is not some monolithic entity.
It is composed of various sectors, which include large, medium and
small systems integrators, component suppliers, parts manufacturers,
and a large element of professional services companies–doing
everything from base support in Bosnia to motor pool operations
in Ohio. The defense industrial base is a varied lot. However, the
one function all elements have in common is that they provide services
or products needed by some element of our national security apparatus.
Defense firms also share basic business needs, one of the most
important of which is access to capital. This is a fundamental need
of every element of our defense industrial base. The requirement
is to have reasonable access to capital, and not to have to depend
solely on increased budgets. This would be facilitated by:
Other thoughts for Rumsfeld to consider:
Other barriers to the entry of commercial firms include: