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Commentary: Industrial Policy Is a Must for Next QDR

Feb. 17, 2014 - 07:50PM   |  
By ANAND DATLA   |   Comments
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The new federal budget has proved a milestone for US government agencies, but an additional thorn for defense industrial base stakeholders. There continues to be little appreciation that US industrial base suppliers are accountable to investors every fiscal quarter for providing materiel such as ships, planes and new weapon systems to the Department of Defense.

If DoD does not respond with guidance to augment the budget, defense industrial suppliers could lose investors, leaving the defense industrial base at risk of losing materiel.

A simple fix is to release defense industrial policy in the Quadrennial Defense Review (QDR) that outlines defense priorities over the next program objective memorandum (POM) to reassure investors of DoDís commitment to the US defense industrial base.

This policy would also give industrial suppliers a chance to realign resources and avoid making layoffs in response to budget cuts. Unfortunately, recent defense policy neglects this link between budgeting and industrial base guidance at a time when it is needed most.

DoD policy has focused on department budget impacts without consideration for the industrial base. Some of the most recent policies, such as the Strategic Choices and Management Review, focus on budget scenarios without consideration of impacts on the industrial base. While this policy is administratively helpful, these scenarios actually lead to further speculation over program preferences, making it difficult to identify technology and services important in the years to come.

Other policies, such as Defense Budget Priorities and Choices 2014, focuses on budget realities and less on deciding key programs required for defense industrial base priorities. The lack of policy leaves suppliers to proceed with caution, since any mix of scenarios in the Strategic Choices and Management Review or other policies may come to pass.

DoDís senior leaders are not publicly addressing the policy shortfall to the industrial base. In late 2013, Defense Secretary Chuck Hagel offered priorities for DoD that identified space, cyber, special operations forces and intelligence, surveillance and reconnaissance as critical areas, but failed to give program preference priorities. Industrial suppliers are left guessing about the best way to align resources to support DoD requirements.

Each of Hagelís priorities includes a staggering number of programs that the department could pursue. In space alone, it is difficult to guess if GPS ($1.3 billion) and the planned purchase of extremely high frequency satellite programs ($652.5 million) are higher or lower in defense priority.

An ideal remedy to fill this policy gap and assert senior leadersí commitment to the industrial base is identifying program priorities in the QDR. By using the QDR, a number of issues would be resolved.

First, it would show DoDís commitment to the defense industrial base over the next POM. Second, it would give assurance to defense investors who are otherwise weary of the indiscriminate budget cuts underway. Third, it would give a way forward for suppliers who are otherwise unsure of the best way to realign resources. Finally, it would show adversaries the US is committed to the industrial base despite budget cuts.

The QDR section for addressing industrial policy need not be elaborate. Taking the title (or some variation of) ďBalancing cost savings and maintaining the industrial base,Ē it should show program priorities and their tie-in to DoD strategic areas of interest. Given the interest in the Pacific pivot, the programs with highest preferences should reflect advancing force capability in the Pacific area of operations.

In the case of US Navy programs, this would include MQ-8 Fire Scout UAVs), the Infrared Search and Track System, and Surface Electronic Warfare Improvement Program. These programs give additional weight to stealth and deception despite anticipated budget shortfalls.

Other Navy programs, such as air and missile defense radar and the Evolved Sea Sparrow Missile Block 2, could take second precedence, since they have less to offer in this regard. Navy plans for replenishing ships should also be discussed, since they will take such a large part of force planning over the POM.

Other services should also group program preferences into priorities. Overall, this type of grouping of priorities and broad discussion of acquisition activities over the next POMs will help resolve any outstanding questions from industrial stakeholders.

This rough sketch of a QDR section on industrial policy and choosing program priorities is only the beginning.

The difficult part is expanding the list of preferences for defense programs to support the industrial base over the POM. These decisions will require making tough choices and significant trade-offs in planning.

However, this exercise in decision-making is not without benefit. The outcome will include a more committed set of industrial suppliers that are better able to handle the twists and turns of sequestration in support of the defense industrial base. ■

Anand Datla is a consultant and former US Defense Department civilian who worked on strategic planning, policy and operations. He also served as a professional staff member with the House Armed Services Committee.

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