Problems in U.S. munitions sector illustrate challenges for industrial base.

• Author: Farrell, Lawrence P., Jr.
• Position: PRESIDENT'SPERSPECTIVE

As the defense sector heads toward a future of flat or declining budgets, the health of the industrial base and its critical capabilities becomes a prime concern.

It is not yet apparent that senior policy makers have begun to assess what industrial capabilities must be preserved. Ensuring that the United States is able to maintain core industrial competencies must be a priority before a fiscal downturn becomes reality.

Besides this longer term issue of the industrial base, there are other worrisome trends that require attention in the near term. For many companies, the contracting process continues to create unnecessary burdens that hamper their ability to support the military's needs.

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A case in point is the U.S. munitions industry. The Munitions Industrial Base Task Force (MIBTF) is one of the most active groups in the defense sector. The MIBTF's mission is to ensure there is adequate funding and policies to sustain a responsive capable domestic industrial base to develop, produce and support superior munitions for the U.S. military and its allies.

Over the years, it has conducted many studies, and has proposed detailed plans for how the munitions base would respond to a significant downturn in funding. The task force completed a recent survey that highlights the challenges facing not just the munitions sector, but also the entire defense industry.

The MIBTF polled 19 companies and received 15 responses. This survey was conducted as a result of persisting complaints of slowness in contracting processes, which seriously affects many firms' business operations. It also followed a query to the Joint Munitions Command that revealed oversight problems in munitions programs. For example, program manager reviews are conducted with lower level joint commodity teams, but apparently there is no senior executive level status review of planned or ongoing procurements.

Survey responders said that a lack of timely procurements has affected business (12 of 15 answered yes to this question). Seven of 12 said these delays have caused production lines to go cold, and half of the companies laid workers off. Finally nine of 12 stated that these delays in contracting caused a reduction in revenue for the year. Based on the results of the survey, it appears that the cutbacks in industry were not a result of reduced budgets, but were caused by bureaucratic delays--including Defense Contract Audit Agency (DCAA) audits--that have impeded the...