Defense Industrial Base Strategy: Challenges and Opportunities Ahead

The defense industrial base strategy is a critical component of national security, and it's facing significant challenges ahead. The US defense industry is heavily reliant on imports, with 70% of its components coming from overseas.

The COVID-19 pandemic has highlighted the vulnerability of the defense industrial base, with supply chain disruptions and shortages of critical components. This has led to a renewed focus on domestic production and resilience.

The US government has identified key areas for improvement, including investment in research and development, workforce development, and infrastructure modernization. These efforts aim to enhance the competitiveness and self-sufficiency of the defense industry.

Curious to learn more? Check out: European Defense Industrial Base

The threat environment is a pressing concern for the US, particularly with regards to China. China has modernized its military and now exceeds the US in certain categories, such as hypersonics.

China's military advancements are a result of espionage and intellectual property theft, which has allowed them to incorporate stolen technologies into their own fighter aircraft, like the J-20. This includes technologies found in the F-22 and F-35 aircraft.

The People's Liberation Army Navy (PLAN) has more battle force ships than the US Navy, with a projected growth to 420 ships by 2025 and 460 ships by 2030. This rapid expansion of China's naval capabilities is a significant concern for the US.

Taiwan is also a key concern, as it is vulnerable to a Chinese invasion or attack. The US needs to provide Taiwan with modern weapons to deter such an attack, but current production rates will not meet the necessary time frame to do so.

The defense industrial base is a critical component of national security. It provides the necessary infrastructure, resources, and expertise to support the development and production of defense systems.

The Department of Defense (DoD) recognizes the importance of the defense industrial base, with the Secretary of Defense stating that a "strong and resilient defense industrial base is essential to national security." This is reflected in the DoD's efforts to maintain a diverse and competitive industrial base.

The defense industrial base is also a major driver of economic growth, with the DoD's annual procurement budget exceeding $500 billion. This has a significant impact on the economy, supporting hundreds of thousands of jobs and generating billions of dollars in revenue.

For your interest: Defense Industrial Base

The U.S. has a long history of producing its own military equipment, with a significant shift in production occurring during World War II. The government invested heavily in the production of planes, tanks, and other military equipment, with the goal of becoming self-sufficient.

The Lend-Lease Act of 1941 allowed the U.S. to supply its allies with military equipment, which in turn helped to stimulate domestic production. By the end of the war, the U.S. was producing more planes than any other country.

The U.S. continued to invest in its military production capabilities after World War II, with the Cold War serving as a major driver of investment. The production of nuclear warheads and intercontinental ballistic missiles (ICBMs) became a key aspect of U.S. national security efforts.

The U.S. has maintained a robust domestic military production capability ever since, with the production of advanced fighter jets, submarines, and other military equipment remaining a key aspect of national security efforts.

Defense industrial base organizations should prioritize security visibility through auditing, monitoring, and generating security logs to better understand vulnerabilities. This emphasis is crucial for compliance with the Department of Defense's Cybersecurity Maturity Model Certification framework.

Saif Rahman, CEO and co-founder of Quzara, recommends that defense industrial base organizations focus on having security visibility. This will help them understand the vulnerabilities they face and take necessary steps to mitigate them.

The Government Accountability Office (GAO) has made six recommendations to the Department of Defense (DOD) to mitigate industrial base risks. These recommendations include developing a consolidated and comprehensive strategy to mitigate risks.

DOD has generally concurred with the GAO's recommendations and has identified actions to address them. This indicates a willingness to work towards improving the security of the defense industrial base.

Emerging technology is transforming the defense enterprise, and it's changing how organizations develop strategy while combating threats. This shift is evident in the defense logistics sector.

The industry is now relying heavily on technology to advance defense logistics. The IDB Best Practices for Technology in Defense Logistics highlight the importance of this shift.

The use of emerging technology is crucial for developing strategy and countering threats effectively. It's not just about staying ahead of the curve; it's about staying relevant in a rapidly changing landscape.

The IDB recognizes the significance of technology in defense logistics and has established best practices to guide the industry. These practices aim to leverage technology for improved efficiency and effectiveness.

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The GAO has found that the Department of Defense's Industrial Base Policy office lacks a consolidated and comprehensive strategy to mitigate risks to the industrial base. This is a significant issue, as the industrial base is crucial for developing and manufacturing technologies and weapon systems for the DOD.

The office is using a combination of four previously issued reports, but these reports do not include several key elements that the GAO has previously identified as necessary for DOD to achieve results, evaluate progress, and ensure accountability.

DOD must update its industrial base strategy following the submission of the next National Security Strategy Report, which is expected to be issued later in 2022. By including all elements in a consolidated strategy, DOD could better ensure that all appropriate organizations are working toward the same priorities, promoting supply chain resiliency, and supporting national security objectives.

DOD is carrying out numerous efforts to mitigate risks to the industrial base, including over $1 billion in reported efforts under Navy submarine and destroyer programs and $125 million to sustain a domestic microelectronics manufacturer. However, DOD has limited insight into the effectiveness of these efforts and how much progress it has made addressing risks.

Here are some key challenges that DOD faces in mitigating industrial base risks:

To address these challenges, the GAO is making six recommendations, including that DOD develop a consolidated and comprehensive strategy to mitigate industrial base risks, develop and use enterprise-wide performance measures to monitor the aggregate effectiveness of its efforts, and report on its progress in mitigating risks.

More than 200,000 companies provide supplies, parts, and manufacturing for DOD's weapon systems.

This massive network is vulnerable to risks such as materials shortages, reliance on foreign suppliers, and more.

DOD's current approach to mitigating these risks is fragmented, with various offices and military services working on their own initiatives.

More than 200,000 companies provide supplies, parts, and manufacturing for DOD's weapon systems.

Risks to this defense industrial base include materials shortages, reliance on foreign suppliers, and more.

DOD doesn't have a robust strategy to mitigate risks or track progress department-wide.

The department is working to mitigate risks through various offices and military services, but a lack of visibility makes it difficult to determine the effectiveness of their efforts.

Billions of dollars are being spent to address these risks, but without a clear strategy, it's hard to say if it's paying off.

The survey that gathered all these fascinating facts was conducted in October and November 2023, and it received an impressive 859 responses from companies across the defense industrial base and commercial businesses.

The survey was distributed through a network of Small Business Innovation Research (SBIR) and Small Business Technology Transition (STTR) grant recipients, as well as through LinkedIn and emails to companies that have worked with or are interested in working with the U.S. government.

The respondents represented a broad range of products, levels of experience in working with the government, and funding types.

Here's a breakdown of the types of company output represented in the survey: Company Output% of RespondentsHardware34%Software32%Services34%

More than half of the respondents (68%) have earned commercial revenue, while 87% have earned revenue from federal research and development.