Education Key to Keeping Strong Industrial Base

By Wesley Hallman

Photo: iStock

The National Defense Industrial Association’s calling is simple and compelling. It believes in a strong national defense and a U.S. defense industrial base that provides the best possible capabilities and services to the nation’s forces to keep them superior to any potential adversary or competitor.

That defense industrial base depends on many factors to thrive and innovate on behalf of the warfighter. Those factors include laws, regulations and policies creating a business environment both stable and sufficiently unburdened to enable the great women and men striving in the defense sector to create, build, deliver and sustain service members and those of allies and partners.

As the association and thought leader that represents all sectors and sizes in this great community, NDIA plays a vital role in educating influencers and policymakers in Congress, the executive branch and the judiciary — along with those in other associations, academia and think tanks — about what this sector brings to America and what policy adjustments are necessary to ensure its long-term health. This year has seen some significant wins in those policy adjustments, and I would like to highlight a few.

One way the nation’s competitors have sought to catch up to American capabilities has been outright theft. As our networks hardened, they added another means — buying them. They’ve successfully purchased our innovation by exploiting U.S. investment laws and practices. There’s a long-running mechanism to target this threat, the Committee on Foreign Investment in the United States (CFIUS), but it lacked the strategy and authority to keep pace as adversaries accelerated their legal “acquisition” of America’s technological advances.

CFIUS called for a review only when a foreign entity sought to buy a controlling interest in a company with a national security nexus. These capable competitors instead came in and made what’s called non-passive investments to essentially buy a seat on the corporate boards of high-tech startups, giving them access to their technology and intellectual property.

"NDIA provided comments to adjust the legislation as it applied to overseas joint ventures and subsidiaries."

When the Senate recognized the imperative to update CFIUS, they asked the defense industry for its thoughts. To that end the association convened three panel discussions with its members: the first with the legislative writers; the second with the executive branch agencies who carry out CFIUS reviews; and the third with outside experts to consider unintended consequences.

In collaboration with members, NDIA provided comments to adjust the legislation as it applied to overseas joint ventures and subsidiaries. Congress included these adjustments in the CFIUS provisions in the recently signed fiscal year 2019 National Defense Authorization Act.

NDIA also worked with stakeholders on workforce issues that continue to challenge the defense industrial base. For instance, the security clearance backlog of several hundred thousand is an issue affecting the entire community and impeding vital work. In conjunction with a consortium of like-minded industry associations, NDIA worked for the inclusion of provisions in the NDAA conference report that begin to tackle this chronic problem.

Congress included three separate provisions, one on a trusted information provider program, one on expedited processing of security clearances for mission-critical positions and one on the clearance-in-person concept, in the NDAA. In the meantime, the association continues to engage the executive branch as responsibility for the security clearance program migrates back to the Defense Department.

One last NDAA provision to highlight also affects the broad base of our membership, especially small businesses. As 2017 came to a close, the Office of Management and Budget decided to let a rule lapse that directed the government to accelerate payments, from 30 days to 15 days, to prime contractors with small business subcontractors. The intent of this rule was to expedite funds release to help improve cashflow, and thus the health, of these companies. Several engagements with the executive branch made it clear they would not reverse this decision, and we needed to look elsewhere to educate policy-makers on its importance.

NDIA found an opportunity to highlight this issue during a Greater Los Angeles County Chapter Small Business roundtable with Rep. Steve Knight, R-Calif. The roundtable focused on issues that burden small businesses in the defense industry, including accelerated payments. Knight asked for more information as did the staff of the House Small Business Committee on which he serves.

After engagements with the committee, coupled with some bipartisan support in the Senate, Knight submitted an amendment to this year’s NDAA to codify accelerated payments in the defense sector both to small business prime contractors and prime contractors with small business subcontractors.

One final note, with a signed NDAA and the prospect of a defense appropriations bill coming soon, we could begin the new fiscal year with both the funding and the policy provisions to efficiently execute our national defense strategy from day one of the new fiscal year. We thank the Congress for this potential return to normal order and hope it’s a harbinger of continued budget stability into the future. 

Wesley Hallman (whallman@ndia.org) is vice president of policy at NDIA.

Topics: Defense Innovation, Defense Department, Science and Engineering Technology

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