VITAL SIGNS 2020: Defense Industrial Base's Report Card Reveals 'C' Grade.

Author:Hallman, Wesley

* The Executive Order 13806 report on production risks to critical defense industrial supply chains in 2018 starkly framed the health of the U.S. defense industrial base as key to the readiness of the nation's armed forces to confront near-term threats and their ability to compete long-term against strategic adversaries.

Despite its high-resolution snapshot of the sector's "unprecedented set of challenges," the report does not provide the public and the defense policy community an unclassified summary measurement of the health and readiness of the defense industrial base or a simple way of tracking that over time.

To fill this gap, the National Defense Industrial Association, partnering with data science company Govini, has piloted what it plans as an annual project called "Vital Signs." The subtitle of this year's report is "The Declining Health and Readiness of the Defense Industrial Base." The assessment focuses on standardizing and integrating analyses of different elements of the sector and the business environment shaping its performance.

This year's mediocre "C" grade reflects a business environment characterized by highly contrasting areas of concern and confidence. Deteriorating conditions in 2020 for industrial security and for the availability and cost of skilled labor and materials emerge from this analysis as areas of clear concern. Favorable conditions for competition in the defense contracting market, and rising demand for defense goods and services reflect recent year-over-year growth in the defense budget.

This first of an expected annual study contributes to the debate about national defense acquisition strategy by offering a common set of indicators--vital signs--of what some have called America's "sixth service," the industrial partners providing our warfighters their capability advantages.

To do this assessment, we conducted a months-long study of data from eight different dimensions shaping the performance capabilities of defense contractors including: market competition; demand for defense goods and services; cost and availability of skilled labor and critical materials; investment and productivity in the U.S. national innovation system; threats to industrial security; supply chain performance; industrial surge capacity; and political and regulatory activity.

We analyzed over 40 longitudinal statistical indicators, converting each into an index score on a scale of 0 (bad) to 100 (excellent). We did this over a...

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