The Department of Defense and defense industry have a long history of responding quickly and forcefully to crisis, and the COVID-19 pandemic is no exception. Today, hundreds of thousands of dedicated defense workers remain at their posts – delivering mission-critical products and services to support our troops around the world, while also providing personal protective equipment and other supplies to first responders and health care workers here at home.
However, this most recent crisis has re-exposed weaknesses in our defense industrial base – highlighting the need to significantly bolster the nation’s vital supply chain. This serves as a call to action to develop a strategic, long-term approach across government and industry.
We witnessed the fallout from the 2008-09 financial crisis. Thousands of suppliers shuttered or permanently shifted precious capacity to other verticals when defense budgets were indiscriminately cut following the Budget Control Act of 2011 and sequester of 2013.
When budgets began to recover several years later, the damage was clear – longer lead times that in some cases doubled or more, and increased reliance on single-source and international suppliers for critical components, such as microelectronics.
In 2017, President Trump signed an executive order and established a multi-agency task force to study supply chain resiliency. The task force identified five macro forces that create risk to the supply chain and national security preparedness including sequestration and the uncertainty of government spending, the overall decline of U.S. manufacturing capabilities and capacity, harmful government business and procurement practices, industrial policies of competitor nations, and diminishing U.S. STEM and trade skills.
Task force members proposed a comprehensive set of risk-reduction actions – ranging from establishing sustained and predictable multi-year budgets and developing an adaptive acquisition framework, to directing investment to small businesses and diversifying the supplier base.
Over the past two years, the government has made initial strides on a number of these fronts, including working to reduce U.S. reliance on foreign sources for critical rare earth minerals and decreasing the country’s dependence on China and other international suppliers for semiconductors and related components.
Unfortunately, the COVID-19 pandemic emerged before these and other task force initiatives gained serious traction and forced the DoD to refocus its near-term priorities. And the urgency escalated when we began to see the brutal impact the pandemic was causing in the commercial aerospace sector, an important vertical market for many defense suppliers.
The department quickly designated defense suppliers as essential and increased progress payments, spurring larger defense contractors to accelerate payments to thousands of small business suppliers.
These actions helped companies to continue operating, maintain their employment and hiring goals, and sustain critical spending on internal research and development (IRAD) to keep the innovation engine humming. At L3Harris, for example, we recommitted to investing nearly 4 percent of revenues in IRAD, hiring 6,000 new employees and maintaining our apprenticeship and internship programs to provide opportunities for the workforce of the future.
The combined DoD and industry efforts demonstrate the power of a focused, collaborative approach to mitigate and address the damaging effects of the pandemic and to support the broader defense industrial base.
Today, we are at a critical juncture. We have an opportunity to make the necessary strategic investments that could significantly strengthen our supply base for generations to come, including:
· Ensure sustained/predictable budgets – stable, long-term funding helps companies better plan and encourages them to invest in staffing, technology and facilities needed for the country to maintain its technical superiority. Now is not the time to pull back the reins on defense spending.
· Accelerate contract awards – shorter decision and acquisition cycles enable suppliers to invest in and deliver technologies faster than with traditional methods, and in the near term could help offset the impact of the commercial aerospace downturn.
· Expand domestic supplier base – increasing domestic capabilities reduces vulnerabilities and increases access to critical components, such as rare earths and microelectronics, and over time can help reduce the proportion of sole/single-source supply.
· Increase workforce investment – providing advanced STEM education opportunities drives innovation and productivity by enhancing critical skillsets for existing employees, while attracting, training and growing the workforce of the future.
· Institutionalize process improvements – the COVID-19 pandemic forced government and industry to find new and more efficient ways to work. The challenge now – to make these advances permanent.
These are not quick fixes. However, they provide a strong platform for a more resilient national defense supplier base, which is vital at a time when near-peer adversaries continue to invest heavily in new technologies that threaten our nation’s security.
The imperative is clear – and the opportunity is now.
Bill Brown is chairman and CEO at L3Harris Technologies.