Some Prescriptions for Ailing Defense Industrial Base.

• Author: Halcrow, Stephanie
• Position: Viewpoint

* The defense industrial base is one of the nation's enduring advantages, and one that cannot be taken for granted.

Earlier this year, the National Defense Industrial Association released Vital Signs 2022: The Health and Readiness of the Defense Industrial Base, the third edition of the flagship study. For the first time, the report scored the health of the industrial base business environment below a passing level.

The score does not reflect upon individual companies. Vital Signs measures the defense industry's health through eight conditions that describe the defense business environment over the past year: demand, production inputs, innovation, supply chain, competition, industrial security, political and regulatory environment and productive capacity; and surge readiness.

These vital signs are an attempt to move beyond traditional defense industry analysis, which heavily relies upon the financial performances of a few companies, ignores key indicators and excludes the vast majority of defense contractors that are not publicly traded.

Unlike traditional medical vital signs measured on the spot, our conditions are observed remotely, both in time and space, using publicly available data and results from an annual survey. We believe this information reflects the state of the defense industrial base during the first year of the COVID-19 pandemic.

Based on the findings, we offer the following policy prescriptions.

First, as the Russian-Ukrainian War continues, Ukraine will need to be resupplied and U.S. stocks will need to be replenished. In the first year of the pandemic, the "productive capacity and surge readiness" vital sign demonstrated last year's largest decline, largely due to weakness in the overall economy. In the 2022 survey, 78 percent of respondents said the availability of skilled labor was a moderate or significant problem.

Sixty-three percent indicated the same for the availability of cleared labor when asked what would affect their firm's ability to increase defense production in response to a surge in demand. The Defense Department's continued partnership with industry will be key to this effort.

Next is the need to accelerate acquisition reform. NDIA looks forward to the Commission on Planning, Programming, Budgeting and Execution Reform.

Section 1004 of the fiscal year 2022 National Defense Authorization Act created this independent commission within the legislative branch to recommend reforms of the Defense Department's PPB&E system.

The association is hopeful that the commission will consider efforts to reform the budget process, including implementing a two-year budget and appropriations cycle.

The association also recommends...