DoD to release first industrial strategy by end of year

The Defense Department will release its first defense industrial strategy by the end of the year to better utilize the defense industrial base, while helping to secure supply chains to ensure the DoD is well prepared for the future.

The strategy will focus on four key pillars, said Justin McFarlin, the deputy assistant secretary of Defense for industrial base development and international engagement: resilient supply chains, workforce readiness, flexible acquisition and economic deterrence.

McFarlin said that supply chain and workforce are issues also affecting industry, which is still experiencing the impact of the COVID-19 pandemic and retention challenges.

“The supply chain is extremely taxed, particularly within the munitions area and the sub industrial base, and then everyone’s in competition for employees and for skilled workers,” he told attendees at the annual ComDef conference in Washington on Wednesday.

McFarlin described flexible acquisition as “tackling the issues to try to deliver at speed, at scale and at a reasonable cost. It’s looking at things like requirements, and how do we ensure that there’s minimal scope creep because the more things you pack into requirements, the broader the scope and things that you’re trying to shove into the system or platform, the longer it’s going to take to develop, the longer it’s going to take to deliver and the higher the price is going to be.”

For economic deterrence, McFarlin said this could include things like countering foreign investment activity and watching mergers, acquisitions and other transactions to see what could be an economic security threat.

McFarlin and William LaPlante, the undersecretary of Defense for acquisition and sustainment, said it is important to leverage open systems, modularity and minimum viable capability to accomplish DoD’s goals and deliver fast.

McFarlin said ultimately the Defense Department wants to deliver what the warfighter needs, but that using modularity, open software and making updates or improvements will enable a timelier delivery than trying to get everything all at once.

LaPlante said that government must provide a steady signal or risk ebbs and flows in the supply, which could be problematic in a crisis. LaPlante said this could be done through block buys or multi-year purchase agreements.

“How do we build up the confidence with industry that they can also do their own investment?” LaPlante said.  “And this often comes down to contracts. Speeches are wonderful, I’m giving one now, but contracts are actually more meaningful. And that’s what industry pays attention to and there are commitments industry needs to invest their own money, their capital, their [capital expenditure (CapEx)], their [independent research and development (IRAD)] into expanding production lines and hiring workers and ramping up. The more rapidly we can get these contracts in place and these stable contracts, i.e. multi year, the greater the commitment and overall stability and demand will be for all of us.”

Several industry speakers said that they are looking for signals from the Defense Department for capabilities they should ramp up and what items might be of interest to the department. Industry speakers agreed that programs like Replicator can be a good indication to industry about government intent.

“People will follow contracts, they will follow that demand signal,” Adam Broecker, vice president of LMEvolve at Lockheed Martin, said. “I think the initiative is bold, it’s ambitious, it’s exciting, but I think all investors will be interested to see if it sticks and has staying power and if ultimately it’s either disruptive to existing programs record, or if it’s going to be additive to the ultimate architecture.”

Working with industry and international partners will also be important to support the defense supply chain. McFarlin noted that not everything can be made in the United States and there are benefits to products being manufactured by allies and partners. For example, while some might view it is a positive to have every Navy ship made in the U.S. with U.S. components, it “is not going to deliver the best capabilities to our sailors and ultimately will be detrimental,” McFarlin said. “We do have some authorities that we leverage in order to ensure that we get the best for our warfighters … because, again, the best stuff isn’t necessarily always in the U.S.”

McFarlin said that working with allies and partners to leverage their capabilities and have interoperability and interchangeability is important. He added that supply chain could also limit the ability to have something 100% made in the United States. However, he added that the “DoD is deeply committed to building domestic capacity and capability and growing our economy, creating U.S. jobs and strengthening our national security.”

Several speakers at different panels said that it will also be important to leverage the defense industrial base of allies and partners to meet the threats of the world. Partnerships like AUKUS between Australia, the United Kingdom and the United States are important, as is partnership with Japan in the Indo-Pacific. For example, this collaboration could be coordinating parts or manufacturing in different areas and coming up with strategic investments.

“We just simply need to be able to find new opportunities to create an expanded defense industrial base,” Jedidiah Royal, principal deputy assistant secretary of Defense for Indo-Pacific security affairs, said. “In some cases, that’s entirely possible and thanks to some terrific work by colleagues in the Department of Defense, we’ve been able to make strategic investments to increase production lines and to find new sources of supply that perhaps dried up during the pandemic. That’s been really important work. We’ve got to continue to press into that. And I truly believe the Indo Pacific holds a tremendous amount of promise for all of us if we can open up the regulatory environment, and really find the comparative advantage that exists with allies and partners in the region.”

Royal said that government should look at where it needs to revamp regulation and where it could move faster. He added that the industrial base has been over-regulated as a result of being under-managed, which he said should be addressed.

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