What Is The Real Health Of The Defense Industrial Base?
For many in the defense community concerned about the health of the U.S. industrial base, one person is believed to stand in the way of persuading the Pentagon to do something new and perhaps radical to reverse the slide of U.S. industry. That person is Suzanne Patrick, Deputy Undersecretary of Defense for Industrial Policy, who argues that by most measures the U.S. defense industrial base is innovative and healthy.
But there has been growing pressure on the Pentagon to begin developing strategies to avert the loss of strategic industries. As much of this pressure -- or perhaps more -- is coming from conservative hawks in the defense community concerned about the rise of Communist China as from liberal doves concerned about the loss of good-paying jobs.
Those wanting a more aggressive response to the decline of manufacturing have anecdotal stories of companies and industries that no longer produce in the United States. But Patrick has what her opponents generally do not possess: data and detailed studies assessing the health of specific sectors and the overall health of the U.S. defense industrial base.
Her office is tasked with investigating claims of national security lapses due to loss of industry. Most times, her staff has found that the items in question -- such as rare-earth magnets produced mainly by Chinese-owned companies -- can be supplied by numerous firms both in the United States and in allied nations, or through alternative technologies.
Patrick's office is in the process of finishing a comprehensive series of studies on the technological underpinnings of five broad military "capabilities" that the Joint Chiefs of Staff says are the key to military success in the future. These assessments, called the "Defense Industrial Base Capabilities Studies," represent one the most intensive government efforts in the past decade to chronicle the development of critical technologies down to individual company level of expertise.
These studies, which are available to the public, indicate that many of the most advanced technologies needed for future military systems are well represented by American companies, but that there are some areas that need additional government investment. Patrick's office has proposed the creation of a $100-million defense "Industrial Base Implementation Fund" to support the adoption of innovative technologies throughout the U.S. arsenal.
Patrick has successfully argued that a "Buy American" approach aimed to improving the U.S. industrial base would have "egregious impacts" on the industrial base. "We have tried to see it their way and we have studied it their way," says Patrick, whose sometimes contentious nature has ruffled feathers on Capitol Hill. "But we simply do not come to the conclusion that appears to motivate" those who are calling for a protectionist response to shoring up the defense industrial base. "We just cannot find a national emergency in foreign content."
Patrick also encourages all current and potential military contractors to use the capabilities studies as a means to position themselves in the military market.
"As a body of work, we intended [these studies] as a translation service for companies so they can better understand how they fit into the defense enterprise," says Patrick. "If you are interested in engaging the department in a contract for hardware, this provides you with a way to assess your own industrial capabilities relative to the warfighting capabilities required by the industrial base of the future."
The reports also provide other countries with a framework to develop their own defense industries, says Patrick. "One of the things we have learned is that because of the scope of the [studies], we have unintentionally pre-done a lot of the work that any country or any super-national organization interested in industrial base state matters would have to do for themselves," she says. "If you are a country interested in assuring sufficiency in your own industrial base, you would probably take a subset of our warfighting capabilities, choose which ones are the most important to you, assess your own industrial base capabilities and see how you stack up."
The real value of the reports, says Patrick, lies in their appendices, where there are exhaustive lists of future military requirements and descriptions of the hundreds of companies that can fulfill them.
Once the last capability study is finished in May on "Focused Logistics," Patrick's office will begin a larger communication and implementation strategy throughout the Defense Department to assure the future supply of critical technologies. "We want to have a complete view before we begin implementation because there may be synergy issues we want to address before we begin to implement the findings," says Patrick.
The reports are worthy of downloading and can be viewed at http://www.acq.osd.mil/ip.
Patrick sat down in her office in the Pentagon with Manufacturing & Technology News editor Richard McCormack. She was joined by Gary Powell of her staff. Here is some of what they had to say. The full interview is available for subscribers.
Q: There is growing concern over the broader U.S. industrial base upon which the defense industrial base depends. DOD is dependent on the health of these industries to generate revenue to fund R&D for the next generation of technology. Do you feel that there is a need to look at the trends in these broader industries and where they are going, similar to the study you are conducting on the semiconductor industry?
Q: The location of the physical production as opposed to who owns the production seems to have a lot of people concerned. In a variety of industries that production has moved or is moving to places where people do not feel overly comfortable and confident that it's in a secure location. How do you deal with the issue of globalization?
Q: Is the Department of Defense concerned that the semiconductor industry is putting most of its new production in China rather than in the United States?
Q: Are you concerned about the impact on business conditions in the United States from the investment in new capacity that is not being made here but in China and elsewhere?
Q: Isn't that because DOD is such a huge part of the aerospace market and those foreign companies have to be here physically to serve that market?
Q: There are still concerns in that industry. The Aerospace Industries Association put together a panel three years ago chaired by [retired] Rep. [Bob] Walker saying there are problems and the U.S. could lose its aerospace industrial base unless there was a new investment strategy.
Q: There is still concern among the producers of components and sub-components. The aerospace suppliers in Connecticut created the group "Save American Manufacturing." They're seeing United Technologies buying the same components from Poland for one-eighth the cost. So there is still a lot of concern in that community.
Q: The concern is the money is going overseas to build competitors' capabilities, while at the same time the U.S. is losing that capability, and there are greater societal costs that are difficult to measure. So for want of saving $10 it's going to cost the society $100, with companies going out of business and workers having to take low-paying jobs.
Q: People who perceive problems in the industrial base believe it is an ideological stance that prohibits you from seeing the point of view that a [Rep.] Duncan Hunter [R-Calif.] or [Rep.] Don Manzullo [R-Ill.] would otherwise be promulgating. For a lot of people, they view it as an ideological opposition to getting more active in preserving the industrial base.
Q: In the mid 1980s, the Joint Chiefs of Staff was concerned about foreign dependence on machine tools and they took action. Since then the United States has become even more dependent on overseas suppliers of machine tools.
Q: I'm told by military people concerned about the industrial base that the United States won the Cold War because of the country's economic and technological prowess, and it's losing that now, so they ask: how are we going to win the next war?
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