Defense

How the Defense Department can improve surge capacity in the supply chain

In war, the only thing worse than getting there late is running out of ammunition. No one has infinite stockpiles. The drawdown in support of Ukraine has shown ...

Tom Temin@tteminWFED

July 13, 2023 12:50 pm

9 min read

In war, the only thing worse than getting there late is running out of ammunition. No one has infinite stockpiles. The drawdown in support of Ukraine has shown the need to boost the surge capacity of the defense industrial base. Now the George Mason University Center for Government Contracting has offered a list of ways to deal with the capacity deficit. To learn more, Federal Drive with Tom Temin spoke with Jerry McGinn, the center’s executive director.

Interview Transcript:

Tom Temin And Ukraine really has shown what? That we just can’t restock fast enough that if the United States was in a war, we could run out of ammo and systems.

Jerry McGinn Yes. It’s shown that we have a real capacity problem. Beyond just Ukraine, there’s been a lot of unclassified war games and looking at Taiwan scenario we run out of fighter jets in two weeks and missiles in a week. So we have a real capacity challenge.

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Tom Temin Your report, which is very detailed, I guess you did it originally for the Navy. Correct?

Jerry McGinn We did it as part of the Naval Postgraduate School Acquisition Research Symposium. Their conference, yes. And we looked at what we called a build allied approach for building capacity.

Tom Temin That is other nations that are allied with us take part in the industrial base and the industrial work to keep everybody stockpiled.

Jerry McGinn That’s correct. Essentially, one of the things that COVID has shown and the support of Ukraine has shown is that we have kind of the same industrial base in a lot of ways. I mean, we already have kind of foreign companies that provide systems or subsystems to the U.S., and that’s been going on for decades. But we have many of the same suppliers. So if we more intentionally focus on spurring those kind of collaborations, we get a larger industrial base for the U.S. and for our partners and allies. So that’s how we build capacities in spurring this further.

Tom Temin Because when you go to the big shows, Sea Air Space or the Army show in Washington every year, what’s always interesting on the show floor itself is how many foreign companies are there. Who knew they also make missiles and helicopters and all of these things. Should it be that these, maybe the number of models of things, the selection of missiles gets reduced and more people make the same thing for everybody, and therefore that would be a surge in capacity.

Jerry McGinn That is one approach where you essentially build less unique systems and kind of more scale. Some people have thought about that, but that would be kind of truly revolutionary. We’re not there yet, I think.

Tom Temin And it would also stifle innovation if some Belgian or Australian contractor comes up with a better way to better fuse or a better guidance system. Why would you not want to have that on U.S. stuff?

Jerry McGinn Right, exactly. So there’s some that argue that in some ways we built two exquisite systems. Our systems are too exquisite. And maybe we should build systems that are kind of just good enough, and there’s a place for that. But domestically, we’re always going to build the best possible system for our warfighters.

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Tom Temin We’ll also there’s the idea of exquisite systems means maybe fewer people. And so you can throw a lot of people at something with inferior systems, but then you become like Russia. And that’s kind of not our gestalt here in the United States.

Jerry McGinn It is not.

Tom Temin And you focus in this report, you use a case history of the Javelin missiles and the [High Mobility Artillery Rocket System (HIMARS)] launching system. What is the story with those?

Jerry McGinn Yeah, we looked at a series of case studies to look at, because we’ve done this kind of international collaboration before and we do it now, like F-35, even MRAP. And we look at what are the lessons from that? So we can actually spur more collaboration in for programs like HIMARS. And so we kind of come with some findings and recommendations that are focused on really building on the really positive environment that is today, because there’s a lot of energy behind industrial collaboration. If you look at the National Defense strategy in the U.S., it mentions allies and partners 32 times. OK, but what does that mean? But you see pragmatically in the National Defense Authorization Act, there’s a number of provisions to help spur kind of working with allies and partners, really the Brits and Australians and so on. That’s a very positive sign.

Tom Temin We’re speaking with Jerry McGinn. He is the executive director of the George Mason University Center for Government Contracting. In the report, again, you cite several mechanisms that have been longstanding that support this idea of build allied, the reciprocal defense procurement and acquisition policy memoranda of understanding. There’s a long set of letters for that. The security of supply arrangements and several others. Is it just a matter of scaling those up, do you think?

Jerry McGinn Yeah, Well, I think there’s a couple of things. Yeah. So the RDP MOU, as you mentioned. Some of these I call enablers have been longstanding, but they’re not really well known. Now, the fact that when the U.S. and another country signs and RDP MOU that enables our companies, our U.S. based companies, Lockheed Martin, Northrop Grumman to sell into those markets, but it also enables headquarters in those companies to be exempt from Buy America legislation and so on. But that’s not really well known down at the program executive offices across the country or in the services or in Congress. There’s much more that can be done to create more collaboration for companies to support the U.S. warfighter through using these vehicles. And then there are some, like the National technology industrial base in the Australia, U.K., U.S. Agreement Archives. These ones are newer, and they could really use ways to get real hooks into real collaboration. And that’s where we need export control laws passed in the like.

Tom Temin And there is the question of usage, I guess, or how much you need to build at a given time. So say in peacetime, and you need javelins to train with and javelins to recycle, I guess they get old if you don’t use them in this kind of thing. That’s very different, restocking with a couple of suppliers seems relatively simple because it’s predictable in a actual hot situation of war and suddenly you’re launching thousands of these things. That’s when that base has to be there. And that’s hard on companies if they have no demand cues and suddenly the nation is at war or God forbid, all of a sudden, hey, we need 10,000 a week of these things. That’s really the crux of the matter it seems like.

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Jerry McGinn It is, and there’s a recognition in government and in the industry that we’re not building enough now, but sort of what is the steady state of the future? And it’s really hard to find that balance, because companies can build new factories if the government pays them to do it. But in three years, what if there’s no demand? So then they had to shutter it. So it’s like finding that right balance of building capacity or building latent capacity through contract cleans and the like is where the government’s going towards. That’s why they’ve set this multi-year procurement to focus on a smoother demand signal for munitions. These kind of things are in work by building capacity is really important and that’s where we have to recognize, and that’s what the focus the report is on, that it doesn’t have to be just U.S. kind of companies. It can also be, like in the case of the Amorim missile, there’s a Norwegian company that is an alternate provider of the rocket motor engine. So there you have a latent capacity. You can grow and ramp production like that.

Tom Temin Is there a difference? Which gets to my next question, is there a difference between the ordnance, if you will, and the system that launches the ordnance? If you look at like a Patriot missile or one of these HIMAR things, they look like gigantic wine crates with all the tubes and all the missiles come out of there, that’s used over and over and over again. It’s the missiles, the consumable. If you lose one of those launch systems or lose a series of those, some of them are as big as a giant truck. And that’s not something that anybody can just gear up and build. It probably takes a year to build one in the first place.

Jerry McGinn Right. Yeah, so those longer lead items, it’s always kind of a challenge of getting that kind of how much is enough challenge. But right now we’re clearly not producing enough and we don’t have enough on stockpiles.

Tom Temin So who should read your report? Acquisition people, defense planners, everybody, all of the above?

Jerry McGinn The broad government contracting community. I want those that on Capitol Hill they’re interested is like, how do we build capacity? And what role do allies and partners play? Those in the department and in the State Department as well grappling with these issues. And a lot of the report is to reinforce things that are already happening. But what argues that we need to increase the scope and the scale, we need to have attitude a bit like former Secretary Bob Gates had on the MRAP, where it’s really kind of he really simplified. And this is one of the key studies in the report is simplify the acquisition process, reduce the requirements, use existing foreign designs and build multiple of them. I want multiple versions in the field in ten months. And so what happened? They produced a whole mess of them. Lots of different providers, a strengthened industrial base. It was expensive. So you can’t do it everywhere, but we have to have that kind of mindset in how we think about developing and fielding systems given the threat that we have today.

Tom Temin And the other good case histories?

Jerry McGinn Well, I think the F-35 is a bad name, but I think it’s actually a really interesting story, because that is actually produced. The parts for the F-35 come from around the world and around the United States. And there’s actually three facilities where they have what they call the final assembly and check out. The main ones in Fort Worth, Texas. But there’s one in Italy and there’s one in Japan. And so those F-35s roll off the rolled assembly line in three different countries. And more than more importantly for sustainment, that those foreign facilities are also used for sustainment and repair. So therefore, you’ve got a place where you say we have a contingency in the Asia Pacific Theater. Those vehicles can be repaired, aircraft can be repaired there or can be ramped up production.