Soldier equipment industry struggles to find path forward.

• Author: Insinna, Valerie
• Position: Soldier Equipment

* When the wars in Iraq and Afghanistan began, the military found itself grappling with a $56 billion equipment shortage.

Now soldier equipment vendors are worried that the coming transition from war will leave them without adequate funding and--perhaps more importantly--without a concrete roadmap of future requirements.

In order to address industry concerns, the Warrior Protection and Readiness Coalition was formed in 2009 to provide an organized voice for companies to engage with the Defense Department and Congress. The group has grown from 12 to 35 members since its inception.

The equipment sector, which includes everything from night vision goggles, knives, and combat uniforms, is fragmented and fragile, said WPRC Executive Director Craig Heilman. Some contractors rely almost exclusively on military sales, while others are primarily commercial businesses that began selling to the military because of wartime needs.

One issue plaguing the industry is opaque funding. While there is a line item on the federal budget for research and development of critical equipment, there is no such line for procurement.

Instead, equipment procurement is primarily done through operations and maintenance accounts and overseas contingency operations (OCO) spending, a supplemental fund for the wars. The Defense Logistics Agency (DLA) handles equipment sustain-ment, using a revolving capital fund.

The Obama administration has proposed cutting OCO funds from $115.3 billion in fiscal year 2012 to $88.5 billion in fiscal year 2013, and placing a $450 billion cap on OCO spending through 2021. However, with no procurement line items on the budget for individual equipment, it's unknown exactly which companies and programs will be hit hardest.

In order to help sustain the industry, there needs to be procurement reform work, said Heilman. "Based on some of the visible budget lines specific to research and development, there's been some good support for R&D funding in this area. When it comes to procurement and what will actually be purchased, we have very little understanding going three, four, five years out."

The most vulnerable companies will likely be those that rely on the Defense Department for a majority of their income, such as those that produce ballistic fabrics or other textiles.

"Because a lot of the textile industry has already left the United States, a lot of what is left is making products for defense needs," Heilman said. "So we'll certainly see...