Key Takeaways from Industrial Base Report.

• Author: Bozman, Jeff
• Position: Government Contracting Insights

Last year, President Donald Trump issued Executive Order 13806, which commissioned a comprehensive evaluation of the defense industrial base and supply chains of the United States. That evaluation recently was released in unclassified form.

In a 140-page report, a Defense Department-led interagency task force identified numerous threats, risks and gaps, and concluded that "[a]ll facets of the manufacturing and defense industrial base are currendy under threat, at a time when strategic competitors and revisionist powers appear to be growing in strength and capability."

The task force made four overarching findings.

First, it determined that the identified impacts and risks primarily affect "sub-tiers" of the supply chains, rather than major defense prime contractors.

Second, it found that a "surprising level of foreign dependence on competitor nations exists."

Third, it observed that human capital challenges are significant, including the decline of STEM and manufacturing trade skills among American workers.

Fourth, it noted that key capabilities are moving offshore to capture foreign market share and to take advantage of cost savings opportunities.

The appendices to the report offered case studies that assessed relevant sectors--ranging from traditional ones like aircraft, munitions and shipbuilding, to "cross-cutting" sectors such as electronics and cybersecurity.

The report also identified several "macro forces"--including the "decline of U.S. manufacturing capability and capacity," the "industrial policies of competitor nations" and "sequestration and uncertainty of U.S. government spending"--that impact the relevant sectors, and "represent the root causes" of major risks to the supply chain.

The identified risk archetypes include threats like single points of failure, erosion of domestic human capital and infrastructure, and foreign dependency.

Importantly, the task force offered a "blueprint for action" that summarized the current and future efforts intended to provide the groundwork for important measures, mitigations and ongoing monitoring that will strengthen the industrial base, without providing detailed policy prescriptions.

As the implementing policies start to take shape, there are some key takeaways for contractors.

First, the report noted that the Pentagon already has tools in place to mitigate some of the identified risks, including authorities to make "direct investment in the lower tier of the industrial base" through...