The Industrial Base Comeback of 2018

2018 promises to bring high-level and sustained attention to the manufacturing and defense industrial base that underpins our nation’s strength, security and prosperity. In April, we’ll see the initial Department of Defense (DOD)  response to the President’s July 2017 Executive Order on “Assessing and Strengthening the Manufacturing and Defense Industrial Base and Supply Chain Resiliency of the United States” (MDIB EO). AIA is working hard – through our recently established Industrial Base Working Group of senior industry thought leaders – to serve as industry’s main conduit of information and dialogue with the DOD and other agencies as the ongoing assessment moves into the policy recommendation stage.

AIA  has communicated an industry-wide perspective to key officials that strengthening the industrial base rests on four pillars – robust, balanced and stable defense spending, streamlined acquisition policy, attention to the development of a talented workforce, and stewardship of key capabilities – and we’ve proposed ten initial priorities that DOD’s assessment should address. They are:

  • Robust budgets that begin buying back readiness and capability lost during the defense drawdown since 2011
  • Balanced funding that meets today’s readiness and operational requirements, while investing in the procurement and modernization needs of tomorrow’s military
  • Stable appropriations across fiscal years, permitting DOD and industry to plan effectively to meet our National Security Strategy
  • Acquisition reforms that enable companies to reduce overhead costs and innovate faster
  • Better industry-DOD dialogue to meet warfighter requirements and encourage innovation
  • Synchronized defense and commercial aerospace policies to create economies of scale and strengthen the supply chain
  • More investment in STEM education to develop critical skills
  • A modernized and accelerated security clearance review process
  • Digital transformation of business processes
  • Innovative technologies that maintain America’s superiority over adversaries

We are also taking our advocacy for policies to strengthen the industrial base into public venues. On January 22, I participated on a panel hosted by the Center for Strategic and International Studies, accompanying the release of the AIA-supported CSIS study entitled Measuring the Impact of Sequestration and the Drawdown on the Defense Industrial Base. My co-panelists were Andrew Hunter, CSIS’s Director for Defense Industrial Initiatives; Eric Chewning, Deputy Assistant Secretary of Defense for Manufacturing and Industrial Base Policy (MIBP); and Frank Kendall, former Under Secretary of Defense for Acquisition, Technology and Logistics.

CSIS Panel Discussion on Jan. 22, 2018

In my remarks I emphasized the study’s key finding – among a wide variety of effects across services, platforms and supply chain tiers – that, due to the decline in DOD spending from 2011 through 2015, the number of prime vendors doing business with the DOD fell by roughly 20 percent, or about 17,000 vendors. But I also expressed optimism for the future of the aerospace and defense industry, based on four key developments: (1) bipartisan agreement that we must spend more on defense; (2) the Administration’s commitment to reducing the regulatory burden on industry; (3) a deep understanding of our industry among senior political appointees at DOD; and (4) the effect the MDIB EO has had in bringing widespread attention to industrial base issues.

John Luddy Speaks at CSIS on Jan. 22, 2018

It’s also worth noting the Administration released in January its National Defense Strategy (NDS), which speaks extensively to industry’s vital role in achieving U.S. national security aims. For example, the NDS calls for a larger, more advanced force that can defeat a major power adversary; America’s vibrant aerospace and defense industry is essential for meeting that requirement. The NDS also reflects another key facet of AIA’s advocacy: to win the next war, DOD needs robust, balanced and stable funding. The strategy’s requirement for a “motivated, diverse, and highly skilled civilian workforce” mirrors yet another AIA priority; AIA and DOD are collaborating on several initiatives to attract, develop and inspire America’s top talent to serve in the national security arena. Lastly, the NDS emphasizes the need to “prioritize requests for U.S. military equipment sales, accelerating foreign partner modernization and the ability to integrate with U.S. forces.” These requirements highlight the importance of AIA’s advocacy for a comprehensive “National Security Cooperation Strategy” that strengthens our allies, even as we expect more from them.

Ensuring the health of the manufacturing and defense industrial base; strengthening our allies; developing the next generation of scientists and engineers; winning the next war – none of these priorities can be met without the kind of robust, balanced and stable defense budgets we haven’t had since the passage of the Budget Control Act of 2011. Worse still, for the past eight years, DOD has been forced to operate under continuing resolutions for an average of 126 days each year, and we’ve even had the occasional government shutdown. This is no way for our nation to fulfill the Constitution’s mandate “to provide for the common defense.”

2018 promises to be an inflection point for the manufacturing and defense industrial base. As the voice of American aerospace and defense, AIA is advocating for stronger budgets, smarter regulations and a talented and responsive workforce – we must convince our elected leaders to invest in an industrial base that can deliver on the innovations and equipment we need to ensure our national security far into the future.