President Bush’s proposed defense budget of $379 billion
for fiscal year 2003 represents a dramatic increase over current
spending, but it is insufficient for the task at hand, NDIA President
Lawrence P. Farrell testified at a mid-March congressional hearing.
The request “sounds large,” Farrell told the House
Armed Services Military Procurement Subcommittee. “But when
compared with the needs—homeland security emergency requirements,
past unpaid bills, increased ops temp—only about $10 billion
is available for new requirements or increased procurements. And
that is not enough.”
The services have “a lot of tired iron”—old vehicles,
ships and aircraft—and that affects how they perform in combat,
said Farrell, a retired Air Force lieutenant general. “War
and conflict are come-as-you-are events. The trained troops and
the weapons systems employed are the products of previous investments,”
he explained. “Whether the troops and weapons are up to the
task or woefully unprepared depends on the level and commitment
over time to defense spending.”
Whether the defense industrial base is healthy or not “depends
on the same two factors—level and consistency of commitment
over time,” Farrell said. Although the U.S. defense industry
is “second to none,” Farrell said, its health “is
threatened by smaller production runs, fewer new starts and increasing
international competition.”
Also, he said, a number of acquisition laws, regulations and procedures
have forced many companies from the market, leaving the industrial
base, as a whole, smaller and less diverse.
Furthermore, Farrell said, episodic funding and inadequate profit
margins have resulted in a large number of single-source suppliers
who have, in some cases, marginal capability to perform their industrial
function. Many types of ammunition, for example, are only available
from single sources, and a significant number of these are foreign,
Farrell noted.
A healthy industrial base requires skills and personnel to cover
the needs of science and technology, development, program management
and production engineering, Farrell said.
Many of industry’s problems are a result of bureaucratic
barriers deterring companies from doing business with the federal
government, Farrell said. As an example, he cited the need for increased
contract flexibility in the procurement of commercial products and
services.
“We also advocate more competitive sourcing,” Farrell
said. “The resulting increased outsourcing will make [the
Defense Department] more efficient, as well as a more commercially
oriented buyer. Increased outsourcing also provides more financial
robustness to the industrial base.” Industry, he said, “stands
opposed to any barrier that would artificially constrain, limit
or halt the process of competitive sourcing.”
Farrell’s complete statement is available at www.ndia.org
by clicking on “advocacy,” “resources” and
“testimony.”
Speeding Up Industrial Response
During the war on terrorism, a number of federal departments and
agencies are turning to the Commerce Department’s Defense
Priorities and Allocations System to meet war-fighting and homeland-security
requirements, said the system’s program manager, Richard V.
Meyers.
DPAS works to make sure that industrial resources needed to meet
approved national defense and emergency preparedness program requirements
are available on time, Meyers told an annual seminar conducted by
NDIA’s Procurement Committee, held in March in St. Petersburg,
Fla. “It also provides an operating system to support rapid
industrial response in a national emergency,” he said.
Currently, Meyers said, DPAS is supporting Operation Enduring Freedom
in Afghanistan and a number of anti-terrorist programs run by the
Departments of State, Justice and Transportation, he said.
The seminar is a one-day event designed to provide broad coverage
and analysis of timely acquisition-related and industrial security
issues. This year’s seminar included briefings on wartime
procurement laws and security challenges caused by foreign customers
visiting U.S. defense industry facilities.
International Trade Reform
One of NDIA’s Top Issues for 2002 calls for the need to reform
international trade processes, placing priority on safeguarding
national security while balancing the competitive and economic needs
of the U.S. defense technology and industrial base.
In February, NDIA President Lawrence P. Farrell—along with
his AIA and EIA counterparts, as well as 39 CEOs—wrote to
President Bush to say: “Continued emphasis by the Administration
on fundamentally reforming the [export controls] system is critical
... to ensure that it reflects both current global market realities
and America’s strategic policy imperatives.”
Also in February, Farrell testified before the Commission on the
Future of the U.S. Aerospace Industry, citing the steps that need
to be taken to ensure this reform.
Such steps, he said, include reviewing and removing items from
the U.S. Munitions List which, though deemed to be critical technologies,
are available on the mass-market or from foreign competitors and
eliminating bureaucratic barriers that impede the export licensing
process.
NDIA, as a member of the Export Controls Working Group, is closely
following reauthorization of the Export Administration Act, which
governs the export of dual-use items.
NDIA has endorsed the Senate version of the bill that passed last
year. This bill has strong bipartisan support, as well as endorsement
from the administration. However, a companion bill currently awaiting
House floor action would result in much tighter controls on these
items, which both the administration and industry oppose.