First Look

House task force pushes Pentagon to wean itself off Chinese sources

New proposals would require the Pentagon to treat supply chains as a “strategic priority” and identify a plan to get away from materials sourced from China....

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A House Armed Services Committee task force will release legislative proposals today that would require the Pentagon to treat supply chain security as a “strategic priority” and identify a plan to wean itself off key materials sourced from China, according to a draft of the recommendations obtained by Federal News Network.

The committee’s “Defense Critical Supply Chain Task Force” final report includes six major legislative recommendations for inclusion in the fiscal year 2022 defense policy bill. They include a requirement for the Defense Department to have a “department-wide risk assessment strategy and system for continuous monitoring, assessing, and mitigating risk in the defense supply chain,” according to the draft.

DoD should also be required to “employ commercially available tools to map the defense supply chain within one year of enactment,” according to the report.

The task force is also recommending a statutory requirement “to identify supplies and
materials for major end items that come from adversarial nations and implement a plan to
reduce reliance on those nations,” according to the document.

“The defense supply chain presents a national security risk: a significant amount of material in the Defense Industrial Base is sole-sourced from the People’s Republic of China,” it states. “With the requirement for a strategic framework and illuminating the supply chain, the Department must use this information to work with industry, allies and partner nations to lessen the reliance on the People’s Republic of China.”

The task force is led by Reps. Elissa Slotkin (D-Mich.) and Mike Gallagher (R-Wis.), who say they want to build on past assessments of the defense industrial base and have their report lead to effective legislation. The House Armed Services Committee begins marking up the fiscal 2022 defense authorization bill next week.

During an event hosted by the Center for a New American Security today, Slotkin and Gallagher described how the task force was motivated by the supply shortfalls during COVID, when it became difficult to source important supplies like ventilators and personal protective equipment.

“Along came COVID, and really exposed some of those vulnerabilities in a really intense way,” Slotkin said. “And we got to thinking, if it exposed vulnerabilities on the commercial side, what would that mean for the defense supply chain? What would it mean, if those vulnerabilities actually were dependencies, particularly on countries like China?”

Slotkin said an important goal of the report is to get DoD to use a consistent framework for identifying critical supplies so officials can take action to secure those supply chains. The report identifies four critical areas to start with: semiconductors and critical electronic components; rare earth elements; energetic materials; and active pharmaceutical ingredients and therapeutics.

“We took our stab at a first list, but I’m open to the department coming up with a different list,” Slotkin said. “They just gotta have a list.”

She also said the task force heard a range of issues related to sole source suppliers in other countries, but China was the inevitable focus of many foreign dependencies.

“There was no way around it, from day one we were talking about China in particular,” she said. “The Venn diagram of how much we get from China, and how many things we only get from China … it was strong.

The task force is also pushing DoD and its prime contractors to move beyond a mindset where officials assume it’s too difficult to map their supply chains due to contractual issues.

“It’s difficult now,” Gallagher said. “You think it’s going to get any easier if we’re scrapping over Taiwan? No, let’s figure it out in peacetime so that we don’t find ourselves on the losing side during wartime.”

The task force is offering a distinct recommendation for rare earth elements, according to the draft, by requiring the Pentagon to work closely with the departments of Energy and Interior on rare earths research and development.

The task force further addresses the decline in manufacturing and associated trade skills, as it warns any work on supply chain resiliency “will falter” without a workforce plan. The task force is recommending a requirement for the Pentagon to set up a “coalition among industry groups representing defense industrial base contractors, education partners, organizations providing workforce training and development, and other federal partners to focus on career development within manufacturing fields and other areas necessary to secure critical supply chains.”

“You can have a very resilient supply chain for stuff, but if you don’t have skilled trades that can actually work and put things together, particularly here, it’s a limiting factor on the supply chain,” Slotkin said.

The group also wants to bring U.S. allies into the fold by raising the stature of the National Technology and Industrial Base (NTIB), according to the draft report. The NTIB includes dual-use research and development activities in the United States, Canada, the United Kingdom and Australia.

The draft includes a recommendation to “emphasize the value of broad collaboration” with NTIB allies, expanding it beyond acquisition to serve as “a test bed for closer international cooperation and supply chain resiliency.” The proposal would also urge DoD to “harmonize” supply chain policies with the NTIB countries.

“What we quickly learned in talking with our allies and talking with industry is that while this concept is a valuable one, and our closest allies welcome it, it hasn’t really amounted to much in practice,” Gallagher said. “So part of what we’re recommending is using the existing NTIB framework, and figure out a way to put some meat on the bones of the NTIB.”

The draft report also includes additional recommendations for DoD and the White House on issues like reforming the Defense Production Act and updating the Committee on Foreign Investment in the United States. The Biden administration has also launched a series of supply chain initiatives in recent months aimed at reducing risks in sectors like critical minerals, semiconductors, high-capacity batteries, and active pharmaceutical ingredients.

“If nothing else, we hope to have begun the discussion with the Pentagon and nudged the Pentagon to move faster, and in a better direction,” Gallagher said.

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