Future of the Defense Industrial Base


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Redesigning Defense


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The Defense Industrial Base


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The US and international defense industrial sectors have faced many challenges over the last twenty years, including cycles of growth and shrinkage in defense budgets, shifts in strategic defense priorities, and macroeconomic volatility. In the current environment, the defense sector faces a combination of these challenges and must struggle with the need to maintain critical aspects of the defense industrial base as defense priorities change and as defense budgets reduce or plateau. Moreover, the defense sector in the US is interconnected both with defense sectors in other countries and with other industry sectors in the US and global economies. As a result, strategic decisions made in one defense sector impact the defense sectors of other countries, as well as other areas of the economy. Given her academic, corporate, and Department of Defense experience as a leading economist and policy-maker, Dr. Nayantara Hensel is perfectly positioned to examine the interrelationship between these forces both historically and in the current environment, and to assess the implications for the future global defense industrial base.







The National Security Industrial Base


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At a moment of historic highs in defense spending, there is growing concern about the future of American defense industry as well as the national security industrial and scientific base more generally. As we explore the needs and future of the defense industrial base it is important to recognize that there is no one silver bullet solution to the challenges that range from how to manage an austere defense budget environment to how to solve long-term trends in fields that may not seem directly linked, but are foundational, like STEM education. Even more, it is important to recognize that there are many questions that remain open in a sense, requiring greater study and analysis. These include: what is the range of probable levels of future American defense spending in the coming years, as well as the likely resources available for weapons acquisition? What apportionment of acquisition resources between procurement, on the one hand, and research, development, testing and evaluation on the other makes sense, and should the structure of contracts be changed to strengthen one process or the other? How can key innovation and design-team capabilities be retained even in an era of fewer new key program starts? How can industry-Pentagon dialogue, now probably too constrained, be best promoted in a manner consistent with tight ethics restrictions? Which specific areas of technological capability might require protection so that at least one to two key American suppliers remain? Relatedly, how can the defense industry subcontractor base be kept viable, including at the small-business level? Which export control reforms are needed? How can defense workforce excellence be retained, in terms of STEM competence, military experience, and financial and organizational acumen, as a key generation of workers and leaders retires in the coming years? Throughout the process, American planners should remember that winning wars takes first and foremost great troopers, as well as excellent strategists to guide their operations and employment. But it also takes outstanding equipment and technology. We should neither lose sight of this fact nor consider the high quality of U.S. weaponry a God-given birthright of the American people and their men and women in arms.







Building Future Security


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Manufacturing Technology


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The U.S. defense industrial base is deteriorating. Long lead times to procure weapon systems, high costs, uncertain quality, and dependence on procurement of electronic components from other countries are symptoms of a decline in the capability of the U.S. defense industrial base. A primary cause of this decline is the failure of the Department of Defense (DOD) and its contractors in the U.S. defense industry to invest sufficiently in manufacturing technology. The lack of investment reflects DOD's history of concentrating its resources and attention on product technology rather than process technology. As we described in our initial report, The Role of the Department of Defense in Supporting Manufacturing Technology Development, existing procurement policies and regulations do not provide sufficient investment incentives to contractors. Therefore, direct funding for some manufacturing technology development will have to be provided by DOD.