Commentary: Defense Department Tackling Industrial Base Issues

By Jennifer Santos

iStock photo

From the very first day of the Trump administration, the health and resiliency of the industrial base has been at the forefront of the national security conversation.

The National Defense Industrial Association has been a strong partner in assisting the Defense Department in understanding the challenges and opportunities that industry and the Pentagon collectively face.

The report NDIA recently released, “Vital Signs 2020: The Health and Readiness of the Defense Industrial Base,” is yet another contribution the association has made in this critical national security conversation.

The “Vital Signs” project undertook a difficult challenge: grade the health of the defense industrial base. The report presents itself as a counter — or more comprehensive — perspective to the department’s report in response to Executive Order 13806. In reality, the two reports are complements. They utilize different approaches and different risk frameworks to achieve the same goal: placing the health of the industrial base as a consistent part of the national security dialogue.

Where the two reports diverge is on recent Defense Department action to support industry. As the deputy assistant secretary of defense for industrial policy, I would like to introduce and reinforce some of the many actions that this administration is undertaking to support the security, resiliency and health of the defense industrial base.

Examples of these activities include helping industry work with the department. To support the office of industrial policy’s responsibility to act as a “help desk” to industry, we published the “Defense Acquisition Welcome Mat,” a hyperlinked representation of the key touchpoints for any business that might wish to create or expand their relationship with the Defense Department. Our office also submitted the “DoD Small Business Strategy” to Congress, a report which focuses on aligning the department’s small business activities with the National Defense Strategy and strengthening its ability to serve small businesses.

To combat the exploitation of the loopholes in the legal processes that erode America’s technology advantage, the department worked with interagency partners to pass the Foreign Investment Risk Review Modernization Act of 2018, expanding oversight of the Committee on Foreign Investment in the United States — better known as CFIUS — to include joint ventures and real estate transactions. The department studied the way the U.S. industrial base was being taken advantage of and increased its ability to fight back.

Since October 2018, when the Executive Order 13806 report was delivered to the president, the Defense Production Act Title III program has executed 14 presidential determinations, which specifically define industrial base vulnerabilities and allow the department and industry to work together to mitigate them. They encompass topics like retooling, production capacity increases, and standing up second sources to address industrial base vulnerabilities. Fourteen presidential determinations in one year is unprecedented and speaks to the high visibility industrial base issues are receiving from the highest levels of government leadership.

Another example of change comes in the form of a seemingly obscure Defense Federal Acquisition Regulation Supplement rule on magnet processing that was recently implemented. It required that companies who do business with the department move their processing for specific types of magnets away from adversarial countries to allies and partners. While most have never heard of samarium cobalt or neodymium iron boron magnets, the need for the department to drive defense business away from adversarial sources will have a positive impact on our ability to maintain supply, even in time of war.

Meanwhile, as the services dive deeper into their supply chains and stand up programs to better define, assess and mitigate risk, their efforts have fed into the strategic supply chain conversation being driven by the office of industrial policy. Coordinating those efforts across the department is the recently reinvigorated industrial base council, a three- and four-star level group that helps guide supply chain discussions and analysis across the department, ensuring all involved are discussing risk and mitigation in a way that moves the department and industry collectively toward a more robust and secure industrial base.

The Defense Department is also addressing network vulnerabilities and hacking. The upcoming implementation of the Cybersecurity Maturity Model Certification provides standards against which the Defense Department and industry will be able to define, measure and monitor cybersecurity risk. This is a dramatic step forward in addressing the cybersecurity issues within U.S. and global supply chains, ensuring a common lexicon and framework for cybersecurity against which any company doing work with the department can use to ensure they are in compliance.

And finally, on Nov. 13, the Defense Department and the Texas A&M University System co-sponsored Drone Venture Day, where U.S. manufacturers of unmanned aircraft systems and counter-UAS products had the unique opportunity to meet with trusted capital providers to explore mutually beneficial business partnerships focused on national security concerns.

Drone Venture Day represented the inaugural event in a series of “Trusted Capital” opportunities. The next two events are scheduled for March 13 in Austin, Texas, in conjunction with AFWERX, and March 17-18 in Huntsville, Alabama, in conjunction with Army xTechSearch.

All of the efforts outlined above have one goal in mind: build a safe, secure and resilient defense industrial base, which includes both commercial and organic capabilities.

This is our sole mission in the office of industrial policy. It is a core function to support all that the department does to ensure the defense industrial base is capable of providing the warfighter with the tools, equipment, expertise and support they need to execute the National Defense Strategy.

The Defense Department is grateful to NDIA for its efforts in raising awareness of defense industrial base concerns and looks forward to continued work on improving the health of our industrial base.

Jennifer Santos is the deputy assistant secretary of defense for industrial policy.

Topics: Defense Department

Comments (1)

Re: Defense Department Tackling Industrial Base Issues

Comment - Erik Lenderman | Thank you to Jennifer Santos, U.S. Deputy Assistant Secretary of Defense for Industrial Policy for this policy update. The Executive Order report of 2018 provided a high quality overview of the Pentagon’s path forward, but the industry required additional clarity and a means to monitor progress. Therefore, we were glad to see the release of the National Defense Industrial Association’s “Vital Signs” annual report. This report provided us with “The Health and Readiness of the Defense Industrial Base”, which outlined several challenges the DoD must meet in order to continue protecting the nation.

National Defense Magazine featured Wesley Hallman and Christopher Smith on January 21, 2020 who provided more detail. They conducted an assessment based upon several data sets, which included “market competition; cost and availability of skilled labor and critical materials; demand for defense goods and services; investment and productivity in the U.S. national innovation system; threats to industrial security; supply chain performance; political and regulatory activity; and industrial surge capacity.”

The positive findings included high levels of demand, industrial competition, and a strong capacity for surge readiness. Their report concluded the Pentagon is able to meet its current requirements, and they provided several recommendations for where DoD could increase its human capital capabilities. We are appreciative of the National Defense Magazine and DoD's continued updates on these reports. - Erik Lenderman

Erik Lenderman at 12:35 PM
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