Supply chain resiliency: Procurement lessons learned

Feb. 24 marks the one-year anniversary of Russia’s invasion of Ukraine. As the conflict continued and Ukraine battled for its sovereignty, the United States, ...

This column was originally published on Roger Waldron’s blog at The Coalition for Government Procurement and was republished here with permission from the author.

Feb. 24 marks the one-year anniversary of Russia’s invasion of Ukraine. As the conflict continued and Ukraine battled for its sovereignty, the United States, alongside allied nations, provided critical support for Ukraine. Ahead of this one-year anniversary, President Joe Biden reinforced the U.S. pledge of unwavering support to that country. In providing this continuing aid, the U.S. industrial base will be called upon to increase its production of military supplies and weapons. The challenge will be to provide critical support to Ukraine while replenishing and maintaining our national stockpiles to support national defense.

The federal procurement system is the linchpin in this effort. It connects government requirements to the industrial base, allowing the government to communicate effectively its needs to the supply chain. The procurement system, with all its procedural and customer requirements, essentially shapes the industrial base that supports the federal mission. Of course, fundamental economic and policy impacts and imperatives drive supply chain resiliency for all, including the federal government. Here, we are reminded of the nation’s response to the COVID-19 pandemic, which highlighted the scale, scope and complexity of the supply chain across a host of healthcare industries. This complexity created both challenges and opportunities in responding to COVID-19. The procurement system allowed for the collaboration between industry and government that was key to response efforts.

Understanding this connection between the government and the industrial base facilitated by the procurement system, both the pandemic and the invasion of Ukraine provide lessons learned in promoting supply chain resiliency. We see these lessons in the areas of financial planning and support, requirements development, and buy American-buy allied sourcing.

I. Sound, consistent financial planning and support

Sound financial planning and support over the long term is critical to successful execution of agency missions on behalf of the American people. From a procurement perspective, they are essential to maintaining the industrial base and addressing supply chain resiliency. For example, Defense Production Act (DPA) investments made in domestic healthcare supply chain manufacturing capabilities during COVID-19 are at of risk of “dying on the vine” without strategic, long term supply contracts that meet mission requirements while supporting these new domestic capabilities. Some items may need diligent rotation to avoid waste and assure the availability of useful products. Those efforts require planning and ongoing financial management that communicates to the market the continuing demand needed to sustain productive capacity. The fear is that, over time, we will lose our focus on addressing the gaps in the supply chain, leaving us right back where we were pre-COVID. Similarly, in the context of Ukraine, we see the importance of strategic contractual/financial commitments to maintain ammunition stocks and production capability.

II. Sound requirements development

Sound requirements development is foundational to successful procurement outcomes, including streamlining acquisitions. Part and parcel of sound requirements development is communication/engagement with industry around contract performance requirements, including volume and schedule. Engagement with industry early in the acquisition planning process reduces risk for government and industry. It helps set expectations in the market as to what will drive contract performance parameters. Some of the key contract techniques, practices and/or features that are products of sound requirements development include the following:

  • Clear articulation of contract performance requirements through the statement of work enhances the “meeting of the minds” during contract negotiations, award, and administration. Ultimately, clear, consistent communication of performance requirements ensures the government gets what it needs to meet mission requirements.
  • Volume commitments over the long term ensure continued contract support and allow the industrial base to assess the viability of the opportunity.
  • Surge capacity as a contract deliverable should be a best practice for critical supplies. Surge capacity as a deliverable ensures that the contract addresses not only the existing need for supplies and services, but also the critical need for supplies and services in exigent circumstances when demand is high.
  • Stockpiling is part of a holistic, successful supply chain solution. Acquisition planning should address the stockpiling of critical supplies over time, consistent with developing volume commitments over multi-year contracts.

III. Buy American and buy allied

The government’s efforts to build up the nation’s manufacturing capacity and supply base are a positive lesson learned from the pandemic and the Ukraine war. The pandemic revealed challenges and complexities in meeting the healthcare needs of our citizens during an emergency. The Russian invasion of Ukraine and our response in supporting Ukraine’s homeland defense also have revealed challenges in defense industrial production during times of conflict.

Investing in the domestic industrial base, in part, through long term contracts that maintain surge capabilities, clearly makes sense. At the same time, given the scope, scale, and complexity of the global supply chain, buy Allied should be considered as part of a holistic, strategic approach to a resilient supply chain. America’s relationship with allies is a strength. Allies play a vital role in the supply chain, both economically and militarily, as they bring unique capabilities to mission needs. Embracing this strength, while investing in domestic capabilities, is a strategic imperative.

The procurement system provides a key opportunity in this regard. Although much of the focus recently has been on the application of the Buy American Act (BAA) to acquisitions, perhaps the Trade Agreements Act (TAA) provides a sound alternative. The TAA and the numerous free trade agreements reflect the potential of a buy allied approach that can support a resilient, holistic supply chain. Moreover, under acquisitions subject to the TAA, products, and services from adversaries, like China, are prohibited from purchase by the federal government. In contrast, under acquisitions subject to the BAA, after applying a price differential, products from China can be purchased by the federal government. As such, the TAA approach protects against predatory pricing strategies and “gaming” that can undercut domestic capabilities by excluding products from certain countries. The net result is that the TAA supports domestic capabilities while at the same time including our allies in the collective support of a mission.

Certainly, the pandemic and the attack on Ukraine represent global threats that have challenged nations seeking to address their effects. In addressing those challenges, however, they have prompted a discussion of the lessons learned for the future and, from the standpoint of government procurement, as discussed here, a recognition of the important connection between government and industry facilitated by the procurement system.

We look forward to continuing the discussion on the role of the procurement system in supporting supply chain resiliency.


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