Deterioriation Of The Us Defense Industrial Base

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.

The presence of a technologically superior defense industrial base has been a foundation of U.S. strategy since 1945. While the implementation of the budget cuts in the Budget Control Act of 2011 has caused concerns for the industrial base, the resulting debate has been lacking in empirical analysis. The purpose of this research is to measure the impact of the current defense drawdown across all the tiers of the industrial base. This report analyzes prime and subprime Defense Department contract data to measures the impacts of the drawdown by sector to better understand how prime and subprime contractors have responded to this external market shock.

Eisenhower's warning about undue influence, rather than the need to maintain American military strength, tends to dominate contemporary discussions of the US defense industrial base. While the percentage of US gross domestic product going to national defense remains low compared to the 1950s and 1960s, there is a growing list of defense programs that have experienced problems with cost, schedule, and, in a few cases, weapon performance. In fairness, the federal government, including the Department of Defense and Congress, is at least as much to blame for many of these programmatic difficulties as US defense firms. Nevertheless, those critical of the defense industry tend to concentrate on these acquisition shortcomings. The main focus of this report is on a larger question. How prepared is the US defense industrial base to meet the needs of the US military Services in coming decades? The Cold War challenge of Soviet power has largely ebbed, but new challenges have emerged. There is the immediate threat of the violence stemming from Salafi- Takfiri and Khomeinist terrorist groups and their state sponsors, that have consumed so much American blood and treasure in Iraq; the longer-term challenge of authoritarian capitalist regimes epitomized by the rise of China and a resurgent Russia; and, not least, the worsening problem of proliferation, particularly of nuclear weapons. In the face of these more complex and varied challenges, it would surely be premature to begin dismantling the US defense industry. From a competitive perspective, therefore, the vital question about the defense industrial base is whether it will be as much a source of long-term advantage in the decades ahead as it has been since the 1950s.

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.