NDIA POLICY POINTS DEFENSE DEPARTMENT
Vital Signs Report Reflects Some Sobering News
Photo: iStockThe National Defense Industrial Association’s second annual Vital Signs report on the health of the U.S. defense industrial base was released Feb. 2. To download a copy, please click HERE.
As we await the publication of “Vital Signs 2021,” I am reminded of President George Washington’s First Annual Address to Congress almost 231 years ago this month.
In his address, Washington advised the 1st Congress “that they should promote such manufactories, [that] tend[s] to render them independent on others for essential, particularly for military supplies.” Over the last 10 months, the COVID-19 pandemic has forced Americans to pay attention to the supply chains that support their everyday lives. For businesses and policymakers too, the pandemic has placed a renewed focus on the resiliency of U.S. industry and the defense industrial base.
In service to “promoting” the industrial base, “Vital Signs 2021: The Health and Readiness of the Defense Industrial Base,” the National Defense Industrial Association’s second annual edition, is designed to measure the status of the defense industry’s health through eight conditions which describe the business environment that defense firms must cope with.
Like the four traditional vital sign conditions that physicians use to assess the status of their patients’ life-sustaining functions — temperature, pulse, respiratory rate and blood pressure — we believe that the following eight conditions are essential to a well-functioning defense industrial base: competition, production inputs, demand, innovation, industrial security, supply chain, political and regulatory environment, and productive capacity and surge readiness.
Unlike the traditional medical vital signs, our condition scores and overall grade are not measured in real time but reflect the state of the defense industrial base before the COVID-19 pandemic began. These lagging indicators earned the environment in which we ask the defense industrial base to operate in, a “C” grade for health and readiness — a passing grade. We expect that next year’s grade will capture how the environment changed because of the challenges of the pandemic, the economy and the ongoing social reckoning.
In the past few years, there have been several very well-done assessments produced by other defense-related trade associations, national security think-tanks and universities. Those assessments tended to evaluate the nation’s ability to operate in contested environments, the impacts of specific policies, or simply illuminated facts and figures on the state of the industry. “Vital Signs” is unique amongst those reports because it is the only unclassified annual assessment specifically focused on measuring the health of the defense industrial base in a way that is accessible to NDIA’s members, the American public and policymakers.
“Vital Signs 2021” does not make specific policy recommendations, it does not look at the performance of specific defense industry segments such as ships, autonomous systems, vertical lift, etc., and it does not attempt to make financial forecasts of markets or specific programs.
NDIA members contributed greatly to “Vital Signs 2021,” through a survey that was fielded in August. We used the survey’s results throughout the report and they are a valuable leading indicator in a report that relies heavily on data produced before the pandemic. We had over 1,100 responses to the survey, from all parts of the defense industrial base, which helped us to understand the initial impact of COVID-19, the business sentiment of the defense industrial base, and the capacity of the DIB to surge their operations.
Like NDIA’s numerous engagements on the Cybersecurity Maturity Model Certification, Section 889 of the 2019 NDAA, and other issues, the survey was able to provide members a voice at the table that will positively impact future policymaking cycles. Of the many survey findings, we were surprised to learn that nearly 12 percent of the total survey respondents thought that their business would never return to the level it was at in 2019. This is sobering news.
We are grateful for our continued partnership with the data science company Govini, which allowed us to derive insights from the reams of publicly available information related to Defense Department contracts. Through Govini’s proprietary tradecraft, we were able to learn that the average annual amount of DoD innovation investments that used other transaction authorities rose by nearly 300 percent from 2015-2019, and that foreign military sales obligations increased 74 percent over the same time period.
We learned that the defense industrial base is becoming more competitive in some ways, with an increase in the average number of offers received for full and open competition increasing to 7.68 in 2019, from 4.58 in 2015. Defense services like transportation remain highly fragmented, with 14 offers per award, while professional services received less than two offers per award.
We are also grateful for our summer and academic year cohorts of junior fellows. This year, we were fortunate to have an outstanding group of fellows that mostly joined us remotely, from some of the best policy and law schools in the country.
The fellows fought through the pandemic induced challenges of uncertain class schedules, remote learning, and even a few hurricanes, to contribute to the research and writing of “Vital Signs 2021.” Their grit shows us that the future of defense policymaking will be in good hands.
Nick Jones is director of regulatory policy at NDIA.
Topics: Defense Department