Budget Cuts, Inadequate Planning Put Munitions Industrial Base in Peril

By Bob Seraphin and Rich Palaschak

Army Chief of Staff Gen. Ray Odierno has warned about a return to the hollow Army that resulted from post-Vietnam War reductions in defense funding. He said the nation must avoid a dangerous repeat.

Another outcome that must be avoided is a hollow industrial base, particularly the ammunition base. The nation’s munitions industrial base requires careful attention now to ensure its ability to meet the needs of the services in the future.

Concern over the health of the munitions industry is not new. As early as 2007, munitions professionals in government and industry concluded that reductions in defense spending were inevitable and that steps had to be taken to soften their impact. Several efforts since then have produced positive, but not decisive, results and have identified areas requiring further work.

Decision makers in the Defense Department and Congress were alerted to the risks and costs of allowing a repeat of the near collapse of the munitions industry in the 1990s. Between fiscal years 1985 and 1994, ammunition procurement declined by 80 percent. Little consideration was given to the effects of this decline on the long-term viability of the industrial base, and little planning was done to sustain the sector. In short order, 70 percent of production capability was permanently lost, along with much of a highly skilled workforce. Subsequent recovery was long and expensive.

Preparation of a “strategic master plan” was begun under the auspices of the Army’s program executive officer for ammunition. The intent is to ensure the industrial base is sized and configured to meet current and future requirements. This work is ongoing.

The Army’s single manager for conventional ammunition (SMCA) is responsible for procuring ammunition items that are common to the services. The SMCA, in collaboration with industry, has developed management tools that are of great value in current operations.

The industrial base assessment tool and the minimum sustaining rate database are now used to analyze proposed ammunition procurement budgets. Through an iterative process, potential negative impacts on the munitions industrial base are identified beforehand. The services are thus afforded the opportunity to mitigate those impacts by adjusting budgets.

While the industry must be configured and maintained to produce munitions required for war reserve and training stocks, difficulties arise in determining those requirements. The computer-based process is scenario-dependent, and includes many assumptions. It produces specific quantities of specific munitions, but these can, and do, vary widely with changes in scenarios or the assumptions that are fed into the computer models. At root, then, munitions requirements figures are best guesses.

The industry must be agile and flexible to meet unexpected changes. Past history provides many examples of overdependence on rigid requirements and little regard for flexibility.

In the Vietnam conflict, requirements for 20 mm ammunition were severely understated. At times, acceptance tests of 20 mm lots, fresh off production lines, were being fired while the remainder of the lots was simultaneously being loaded onto nearby C-141 cargo planes destined for Vietnam.

Also during the Vietnam War, there were occasions when Air Force combat aircraft were sent out on missions with just one bomb because of shortfalls in inventory coupled with a desire to maintain sortie rates.

At the end of the first Iraq War, which lasted only six days, the Army had only one and a half day’s supply worldwide of 25 mm high explosive incendiary tracer ammunition, not counting basic loads, based on the ongoing expenditure rates.

During the second Iraq War, industry received requests for urgent production of 30 mm ammunition that could not be honored. Previously, requirements had been set so low that production lines had been closed and their reconstitution would have taken 15 months.

U.S. involvement in Afghanistan generated enormous demand for small-caliber ammunition. Lake City Army Ammunition Plant in Missouri, the nation’s premier source for small caliber ammunition, was unable to meet the demand. The single manager for conventional ammunition contracted with two overseas sources in South Korea and Israel to supplement deliveries. When Israel subsequently became involved in hostilities, it redirected production to support its own forces, and those contracted deliveries to U.S. forces ceased.

War reserve estimates have been wrong in the past. While a future industrial base must be capable of providing war reserves, it must also retain sufficient flexibility to compensate rapidly when errors become evident. Absent that flexibility, the ability to adequately support war fighters is at risk.

A number of actions can assist the munitions professionals in ensuring there is a capable and efficient industry for future needs.

Change is needed in the requirements process. Demands will evolve, drastically in some cases, to reflect planned changes in national strategy and reductions in force structure. Given these profound changes, the assumptions used in generating requirements via computer models should be critically questioned, and appropriate adjustments made where warranted. Planning will likely envision production lines being shut down and then called upon to resume operation. Assumptions about the ability of a closed line to resume production, as well as the time and cost of doing so, must be carefully examined. Included should be specifics concerning the availability of trained workers.

The budget process must be reviewed. The Army’s single manager for conventional ammunition has the ability to analyze proposed budgets to identify potential negative impacts on the industry. The SMCA exercises authority over procurement of ammunition items that are of common usage, but not those that are service unique. These “non-SMCA” items constitute a significant percentage of all munitions procured, and therefore significantly affect the industry.

Nevertheless, inclusion of non-SMCA items in the munitions database is optional. At this time, the Army and Marine Corps have opted in, but the Navy and Air Force have not. It appears that they have declined because of a dispute over who will pay the attendant administrative costs if they do participate. Prompt resolution of this matter by the office of the secretary of defense would be helpful.

Tactical missiles are not classified as ammunition, and are budgeted in separate accounts not subject to SMCA authority. On the other hand, they require components that are produced by the munitions industry, and are dependent on the sector’s continued viability. As with non-SMCA items, inclusion of tactical missiles in the munitions database would be a positive step, and should be considered by the office of the secretary of defense.

From the outset, the SMCA’s assessment capabilities were planned to be used routinely in the annual budget formulation process. Instead, the decision was taken to revise the Joint Conventional Ammunition Policy and Procedure to require such usage, on the grounds that adoption would be faster and easier. Publication of the revision has now been in process in this joint arena for more than two years. Speedy completion would be a positive step.

The industry must leverage technology. Adequate support of relevant technologies provides a significant multiplier effect, reducing the cost of munitions. It also fosters retention of highly trained engineers and scientists in a field that requires many years to achieve full productivity.

The Defense Department and the military services support a number of manufacturing technology programs that seek affordable, timely production and sustainment of defense systems. A program tailored to the specific needs of the munitions industry should be devised and funded. In particular, the application of improvements to production lines during periods of shutdown would provide cost and efficiency benefits.

Continued support of research-and-development funding for munitions related projects will ensure that the United States retains its technological edge well into the future.

Today, budget cuts are already being felt and some capabilities and workforces are being pared back. Impending cuts will bring more of the same. Defense officials must become, and remain, sensitive and responsive to the difficulties encountered by munitions manufacturers. They should be proactive in asking for information, looking for signs of distress and seeking opportunities that will provide assistance in cases where intervention is warranted.

The United States must support international sales to allies. The services are moving to ensure that plans for munitions buys include adequate consideration of the continued health of the industrial base. This is not the case when international sales of munitions are being considered. In some cases, increases in production levels represented by those sales, when added to U.S. requirements, can be enough to ensure continued viability. Conversely, disapproval of international sales can diminish the ability of the industry to support U.S. forces adequately.

Further, the reluctance of the U.S. military to permit companies to sell ammunition with new capabilities or state-of-the-art technology to even its closest allies is counterproductive. It frustrates efforts to foster interoperability with allies, leaves markets open to technologically equivalent competitors and forfeits opportunities to reduce the costs of U.S. production.

A new Defense Department initiative seeks to ensure that new munitions development efforts include concurrent pursuit of designs for exportability. This is welcome and will be beneficial in the future, provided that the initiative remains adequately funded. Existing ammunition products, however, do not benefit from this effort.

It is imperative that sustaining critical munitions production capabilities become a prime consideration in decisions concerning international sales, especially during periods of reduced U.S. funding.

Requirements calculations and budgetary plans for fiscal year 2015 and beyond must be consistent with efforts to achieve a right-sized munitions industrial base. Without an assured, capable and efficient supply of munitions, armed forces and their weapon platforms are of little use.

Bob Seraphin, a former House Appropriations Committee staffer, is a consultant to the Munitions Industrial Base Task Force. Rich Palaschak is a member of the National Defense Industrial Association’s Industrial Committee of Ammunition Producers.

Topics: Business Trends, Defense Department, DOD Budget, Strategic Weapons

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