VITAL SIGNS 2022: ANNUAL DEFENSE SECTOR REPORT CARD SHOWS FAILING GRADE.

• Author: Hallman, Wes

This year's iteration of Vital Signs: The Health and Readiness of the Defense Industrial Base marks the third consecutive year that the National Defense Industrial Association offers an unclassified analysis of the state and performance of America's defense industrial base as an enterprise.

Accessible to both the American public and defense policy community, Vital Signs strives to provide a comprehensive assessment of the resiliency of the defense sector by standardizing and integrating a set of criteria that reviews its performance in the context of the overall business environment.

The report--to be released in February--frames the health of the defense industrial base as essential to economic and national security and does not examine individual companies or the Defense Department specifically, but rather the challenging environment in which all stakeholders operate.

When researching Vital Signs, NDIA examined data relating to eight "signs" that collectively shape the performance of defense contractors. In a departure from Vital Signs 2020, this year's report indicates a final grade of "Unsatisfactory, Failing" for the health and readiness of the defense industrial base. While technically one point short of a pass mark, specific signs provide cause for real concern.

The eight signs that collectively shaped the performance of defense contractors include: Demand, Production Inputs, Innovation, Supply Chain, Competition, Industrial Security, Political and Regulatory, and Productive Capacity and Surge Readiness. Categorized by factor, NDIA analyzed over 40 publicly available statistical indicators, converted them into an index score scaled from 0 to 100, and evaluated three years of scores for each indicator.

This year, five of the eight signs received a failing grade. This reflects the tumultuous state of the industry as it grappled with the extraordinary ramifications of the COVID-19 pandemic, which dramatically disrupted the lives of individual Americans as well as global commerce.

This past year has witnessed significant deterioration in the signs including "supply chain" as well as "production capacity and surge readiness," which almost certainly is a result of the impact of the pandemic. Conversely, the only sign that significantly improved was "demand," reflecting recent growth in the defense budget.

Vital Signs 2022 also reflects the story of recent political and regulatory action against adversaries and their influence over the...