The Defense Department’s role in sustaining its industrial base is as complex as the base itself, a senior defense official told Congress yesterday.
Testifying before the defense industry panel of the House Armed Services Committee, Brett Lambert, deputy assistant defense secretary of defense for manufacturing and industrial base policy, said the defense industrial base is not a monolithic entity.
It includes companies of all shapes and sizes, from garage start-ups to some of the world’s largest public companies, he noted. The vast majority of those companies act as suppliers, and only a few deal directly with the federal government, Lambert added.
“Companies at any tier and at any size may offer critical or hard-to-produce products that ultimately lead to the systems used by our warfighters,” he said.
Lambert said the challenge for defense officials is analyzing the mass of companies that provide goods and services to the military. As defense budgets grow leaner, the nation’s military superiority can be maintained only if key elements of the industrial base are sustained, matured and nurtured, he added.
“For decades, the U.S. has commanded a decisive lead in the quality of the defense-related research and engineering conducted globally, and in the military capabilities and products that flow from this work,” he said.
That advantage is not a birthright, Lambert told the panel.
“In the high-budget environments of the past, many companies have grown to expect high [profit] margins, independent of quality,” he said. “As budgets shrink, this practice must end. As the budget environment changes, we do expect some niche firms to face difficulty due to decreased demand.”
Those niche firms may be suppliers to prime contractors and may not be readily apparent to defense program managers, who typically have “soda-straw visibility” of projects, he explained.
“We do need greater insight. … We need better data at that second- or third-tier level,” he acknowledged.
DOD officials are working to map and assess the industrial base tier by tier and sector by sector so they can identify “fragility” in the industrial base before critical capabilities are lost, Lambert explained.
Defense officials also are increasing industry outreach efforts, investing in research and development programs and pursuing purchasing strategies that diversify acquisitions across multiple companies, rather than relying on single providers, he said.
“Our commitment to working with industry, however, does not mean the department should underwrite sunset industries or prop up poor business models,” Lambert noted. “It does mean the department will create an environment in which our vital industrial capabilities, a foundation of our strength, can thrive and continue to provide our warfighters with the best systems available at a reasonable cost.”
Andre Gudger, director of DOD’s Office of Small Business Programs, also testified before the panel on the department’s initiatives to expand defense market opportunities for small businesses.
His office manages three programs aimed at fostering small business opportunities, Gudger said: the mentor-protégé program, which gives small businesses one-time help from a larger company to develop future capability; the small-business research and technology transfer program, under which DOD funds technology and services development to meet urgent department needs; and the Indian incentive program, which authorizes contracting officers to make 5 percent incentive payments to Native American-owned subcontractors.
Gudger said his office also has changed acquisition regulations to speed payments to small businesses.
“We recognize access to capital [is] a challenge for most small businesses,” he explained. “This put billions of dollars into small-business pockets … to allow them to hire workers, expand their capabilities and look for ways to participate in new contracting opportunities more rapidly.”
Gudger said the continuing resolutions that have funded federal spending since September 2010, along with uncertainty over the depth of future defense budget cuts, have hindered opportunities for small businesses.
“With the amount of uncertainty, small businesses tend to not invest and make key hires for the future,” he noted.
