Defense Research and Development

Defense Research & Development: From the Warfighter to American Consumers, Redefining Everyday Lives Through Innovation

Federal investments in science and technology research and development are threatened by the current budget environment. The Aerospace Industries Association is embarking on an education effort to inform policymakers, elected leaders and the American public on the impact of federal R&D dollars on the innovations that redefine our everyday lives.

This report – the first in a series that examines the impact of federal investment programs – highlights four case studies of private sector technologies and products that have been largely defined or influenced by defense R&D spending. These case studies include the cellular smart phone, the hospital operating room, the modern automobile and the flat screen television. Each case study provides a narrated illustration of
the product and its connections to defense R&D.

The President’s budget for fiscal year 2015 requests a reduction in science and technology funding across both defense and non-defense discretionary accounts. This would reinforce existing reductions from the past several budget cycles. If sequestration is not addressed in fiscal year 2016 and beyond, this downward angle could turn into a nosedive. AIA believes policymakers must ensure a robust and balanced defense
research program, not only for the substantial benefits it provides to America’s warfighters, but also for the resulting commercial innovations that help grow our productivity and our economy.

Over the past six decades, federal investment in R&D programs has acted as an incubator for innovation, producing an immeasurable array of technological advancements that have come to define modern life and society at large. These investments have provided the basis for a revolution in electronic systems, communications, materials and medical science, the results of which have served as the building blocks for today’s most common technologies, including transistors, the Internet, GPS navigation and liquid crystal technology, to name a few.

The connection between research programs and commercial deployment of technologies is often multi-faceted. Program requirements can provide both the research impetus and critical opportunity for technology to mature through production and continual improvement. However, not all technologies that follow this path spill into the private market. Those that do are defined both by market demand and by calculated private investments that enable them to emerge as profitable products. These disparate paths demonstrate how investments made in advanced research can result in enormous contributions to the nation’s economy and industrial competitiveness.

Restoring Balance in the Defense Acquisition System

Restoring Balance in the Defense Acquisition System

Over the past quarter century, more than 300 commissions and studies have produced a variety of recommendations – some of which have become law – to change the way the U.S. military develops and buys new weapons systems. Yet the Department of Defense acquisition system continues to take longer and deliver less in quantity and capability while costs of modernization programs escalate.

AIA has taken a hard look at what is causing this problem to develop this issue paper about what was discovered to be a multi-faceted issue that largely revolves around extraneous and over burdensome policies, laws and regulations.

Solutions to reducing the burden include:

  • A more efficient and effective cost-benefit analysis program;
  • Better audit practices;
  • Reducing unaffordable burdens;
  • Expanding the use of commercial items;  
  • New intellectual property rules; and
  • Having a reasonable expectation for contractor pay and compensation.
The Conflict Minerals Story

The Conflict Minerals Story

One of the primary methods of supporting Conflict Minerals control is through responsible sourcing of the products that may contain conflict minerals. Responsible sourcing is an important principle of the AIA Supplier Management Council (SMC). The AIA SMC is now actively educating AIA member companies about the release of the SEC Final Rule and the pending disclosure requirements, working with other shareholders and industries involved with this challenge to synergize activities, and providing member companies useful guidance, in the form of best practices.

This document provides a thorough analysis of the issue and along with helpful tips for companies dealing with conflict mineral disclosures. 

AIA Conflict Minerals Snapshot

AIA Conflict Minerals Snapshot

One of the primary methods of supporting Conflict Minerals control is through responsible sourcing of the products that may contain conflict minerals. Responsible sourcing is an important principle of the AIA Supplier Management Council (SMC). The AIA SMC is now actively educating AIA member companies about the release of the SEC Final Rule and the pending disclosure requirements, working with other shareholders and industries involved with this challenge to synergize activities, and providing member companies useful guidance, in the form of best practices.

AIA Conflict Minerals FAQ

AIA Conflict Minerals FAQ

The following frequently asked questions document about conflict minierals outlines the background issues surrounding the issue, what the applicability and scope of the reporting requirements are, what a reasonable country of oragin inquiry (RCOI) is, what is acceptable due dilligence in reporting, how to report conflict minerals in manufactured products, and what an indipendent private sector audit is. 

Sustaining the U.S. Defense Industrial Base

AIA Industrial Base Issue Paper

Commercial Items - Equipping Our Service Members with the Best

Commercial Items - Equipping Our Service Members with the Best

Using commercial items provides the Department of Defense (DOD) with distinct military advantages – access to a wide array of technologies and products developed through industry investment, generally at a lower cost and with a quicker turn-around time than through traditional acquisition programs.  Commercial purchases allow for faster insertion of technologies, lower life cycle costs and greater access to – and support from – the vast array of companies that make up the U.S. civil and military industrial base.

Sequester, Defense Budgets and the Industrial Base

Sequester, Defense Budgets and the Industrial Base

Mandatory budget cuts will dramatically and disproportionately reduce the Defense Department’s modernization accounts, which will damage the industrial base more severely than is commonly believed. The reasons for this that are enumerated in the paper include: The effects of sequester in 2013 were mitigated; Modernization funding, though roughly one-third of the defense budget, will likely absorb nearly half the cuts in sequester’s early years; and DOD is taking a "modernzation holiday"by committing between 15 and 20 percent less to needed programs.

State of the Defense Budget

State of the Defense Budget

Implementation of the Budget Control Act of 2011 is having severe adverse impacts on the defense budget. In real dollar terms, DOD investment spending (Procurement and R&D) in fiscal year 2013 is 24 percent less than it was in fiscal year 2011, the year before the Budget Control Act. Unless the act is changed, fiscal year 2014 could see another 14 percent reduction in investment spending.

Affordable Defense Logistics

Affordable Defense Logistics

“Life Cycle Product Support / Outcome Based Partnerships” and “Management of Commodities” have the potential to save an estimated $20 billion to $25 billion annually.

Deloitte: The Aerospace and Defense Industry in the U.S.

The Aerospace and Defense Industry in the U.S.: A financial and economic impact study

This report was commissioned by AIA to assess the contribution and financial impact the U.S. aerospace and defense industry has had on the American economy, in terms of employment, cash taxes paid, impact on gross domestic product and other financial, economic and qualitative factors. Although typically focused on military and commercial aircraft, space systems and related supply chain portions of “aerospace and defense,” we broadened the definition for this study to include land vehicles and systems, naval vehicles and systems, security and defense contracting software and services. The scope does not cover the users of these products and services, thereby excluding the air transportation industry (cargo and passenger airlines) as well as government employees.

We estimate that the U.S. aerospace and defense industry directly employed 1.05 million workers in 2010. These workers received $84.2 billion in wages and paid $15.4 billion in U.S. Federal individual income
taxes, and $1.9 billion in state individual income taxes. Although not directly in the scope of this study, in addition we found that the Federal government employs an estimated 845,198 aerospace and defense skilled workers at armed forces maintenance and repair depots, National Aeronautics and Space Administration (NASA), Federal Aviation Administration (FAA), other defense agencies including Defense Advanced Research Projects Agency (DARPA) and civilians working at the Department of Defense.

We found the industry has an estimated indirect and induced employment of 2.36 jobs for every 1 directly employed. This employment multiplier is a “direct effect” multiplier, which accounts for primary and secondary effect employment associated with the aerospace and defense industry. It does not contemplate “final demand,” or employment associated with tertiary effect employment well beyond the direct effect of this industry’s employment base. Thus, we believe that indirect and induced employment totals 2.48 million workers, in addition to those cited above who are directly employed. Together with these indirect employees, we estimate the grand total direct, indirect and induced employment associated with the U.S. aerospace and defense industry is 3.53 million jobs, not including industry skilled workers employed by the Federal government or airlines. 

We estimate that these U.S. aerospace and defense companies generated $324.0 billion in sales revenue in 2010, with $15.6 billion in net income after tax at an average pre-tax reported operating profit margin of 10.5%. This margin percent metric was below average, when compared to other industries in America. These companies paid $5.5 billion in corporate income taxes on their earnings, as well as $1.7 billion in state income and similar business taxes. Thus together with individual direct employee taxes, the total industry generated an estimated $37.8 billion in wage and income based taxes to state and Federal government treasuries, not including the taxes paid by indirect and induced industry employment. 

The industry is the largest net exporter, and one of the largest contributors to our nation’s gross exports at $89.6 billion, with a larger portion made up of commercial aircraft bound for foreign carriers. The industry’s
contribution to the nation’s GDP is 2.23%, and as described below, we conclude the industry “punches above its weight,” when considering other beneficial and qualitative impacts to our economy beyond these metrics.

Indeed the industry contributes in ways not directly included in GDP, employment, and taxes paid. Although it has only been 108 years since the Wright Brothers’ first flight, the industry has contributed fundamentally to the way we live, work, travel and communicate with the technology created and continued innovations in jet aircraft, communications satellites, the internet and Global Positioning Systems (GPS), for example. Also, the industry is primarily
responsible for the reduction of casualties in armed conflict due to the technology innovations that keep our warfighters out of harm’s way with unmanned aircraft, sophisticated surveillance sensors and over the horizon strike capability.

Current economic challenges resulting in defense budget declines may impact direct and indirect employment, ability to conduct research and development, and taxes paid. On the other hand, the current up-cycle in commercial aircraft production, thus employment, portends years of future growth potential. However, due to its weighting, the uptick in commercial aircraft production is not expected to make up for the shortfall in overall industry revenues and
employment due to the size of the pending defense downturn.

This study demonstrates the significant economic and financial contributions made by the aerospace and defense industry, and its broader impact on our society. These will be important considerations as constituents assess the impact of changes to investments in research and development and the industrial base, and the continued ability of the industry to create the next generation of game changing products and services.