Signs of Progress on Industrial Base Issues

By Jens Pederson-Giles and Kevin Merrick

Photo: iStock

For decades, defense policymakers have focused attention on the U.S. manufacturing sector as an area of strategic concern for the United States. Issues such as production outsourcing, skilled personnel deficits, insufficient investment in new technologies and equipment and worrisome supply chain resiliency have plagued the manufacturing sector in recent years, encouraging doubts about its ability to meet the military’s need for secure and reliable industrial supply

An interagency task force assessment of the state of the defense industrial base, initiated by President Donald Trump’s Executive Order 13806, identified multiple systemic risks and recommended policy initiatives to address them. Recent actions by the Trump administration have been promising, but strengthening America’s industrial vulnerabilities will be a long process, requiring patience and dedication by policymakers and the contracting community.

Released in September 2018, the interagency task force report titled, “Assessing and Strengthening the Manufacturing and Defense Industrial Base and Supply Chain Resiliency of the United States,” established an important benchmark for understanding the risks to the defense industrial base’s performance. The report identified macro focuses and risk archetypes shaping the industrial base — including uncertainty of government spending, sole source manufacturing and diminishing STEM skills — and specified roughly 300 impacts felt across 16 sectors in a classified appendix.

To address the risks and negative trends raised by the report, the agencies involved provided a lengthy list of recommendations including expanding direct investment in the industrial base, growing workforce development efforts and improving research efforts into next generation technologies.

The Trump administration has taken perhaps its most aggressive policy action to enhance domestic sourcing of rare earth materials. Many advanced defense technologies rely on rare earth materials as ingredients in critical high-performance components. In July 2019, Trump signed five presidential determinations designating light rare earth elements, heavy rare earth elements, rare earth metals and alloys — neodymium iron boron rare earth sintered material permanent magnets, and samarium cobalt rare earth permanent magnets — as critical to national defense under Section 303 of the Defense Production Act of 1950. This act gives the president broad economic policy authorities to create, maintain, expand or restore domestic industrial base capabilities for the purpose of national defense.

Trump also signed similar orders this year regarding small unmanned aerial systems, naval sonobuoys and critical chemicals for missiles and munitions. The Section 303 orders target some of the deficiencies identified in E.O. 13806 report caused by sole source or foreign source production.

In another initiative to reduce reliance on foreign made goods, the Pentagon has begun a partnership with domestic textile manufacturers to produce “smart fabrics” for use in military uniforms. Working through the Advanced Functional Fabrics of America nonprofit, the Defense Department has funded a collaborative research venture between the Massachusetts Institute of Technology, Drexel University and Apex Mills. Together this group has created a factory where they can rapidly design and create prototype smart fabrics which can communicate health information from its wearers and test the feasibility of producing durable outfits with these capabilities on a larger scale.

Financing partnerships to help build innovative and economically viable domestic sources for next-generation uniforms will mitigate the current risks presented by the military’s reliance on single source and foreign source textile providers.

The administration also has used public-private partnerships to expand domestic sourcing of cold-rolled aluminum. The E.O. 13806 report identified cold-rolled aluminum — which serves as an essential ingredient in the armor for military ground vehicles, ships and aircraft — as an area of sourcing risk. The Defense Department leveraged the Cornerstone Initiative, a public-private “consortium of consortiums,” to invest $9.5 million into Constellium’s West Virginia plant to increase the production quality and amount of cold-rolled aluminum.

The department’s industrial base analysis and sustainment program started the Cornerstone Initiative in early 2018 using an other transaction authority agreement funding vehicle. While Cornerstone formed before the 13806 report was published, it stands as a model to emulate in responding to other risk areas mentioned in the report.

The administration has also acted to address risks to the availability of skilled workers. In June 2019, the Department of Labor announced the creation of a new rule which would expand access to industry-recognized apprenticeship programs. This rule would allow educational institutions and industry groups to be authorized as “standards recognition entities,” making them eligible to develop and approve the apprenticeships. Additionally, Labor has pledged $183.8 million dollars in grant money to support universities and industry groups working to build or expand their own apprenticeship programs.

Shortages in skilled domestic laborers is one of the macro-level problems identified by the report, and industrial apprenticeships have a proven record of growing the size and quality of the manufacturing workforce.

In a little over a year since the release of the report, the Trump administration has achieved some early successes in addressing the vulnerabilities it identified. Despite the reasons for cautious optimism, there remains significant work to be done to fully implement the recommendations. Restoring and advancing U.S. manufacturing will require years of effort. 

Jens Pederson-Giles and Kevin Merrick are NDIA junior fellows.

Topics: Defense Contracting, Defense Department

Comments (1)

Re: Signs of Progress on Industrial Base Issues

Erik Lenderman | Former Secretary Mattis produced the September 2018 report, “Assessing and Strengthening the Manufacturing and Defense Industrial Base and Supply Chain Resiliency of the United States”. According to BusinessDefense.gov, the 16 working groups consisted of 300 experts from a variety of agencies. They determined that several supply chain risks emerged due to “sole source” and “fragile suppliers”. Therefore, the Pentagon / DoD determined it will make use of the Defense Production Act (Title III) and Industrial Base Analysis and Sustainment protocols to reinforce the supply chain. The President signed a Cabinet Memorandum that advised his Secretaries to implement the report’s multi-agency recommendations. Jens Pederson-Giles and Kevin Merrick provided an excellent analysis, which addressed several steps the White House took to address these problems. Specifically, we were interested in the administration’s decision to increase production of domestic rare earth materials and durable goods. The collaboration between DoD and MIT has been long standing, but the rapid prototyping of novel smart fabrics were of particular interest. The supply chain analysis provides a unique opportunity for the Pentagon to continue developing innovative solutions to protect the nation.

- Erik Lenderman

Erik Lenderman at 6:03 PM
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