Defense Sector Prioritizes Enhanced Production Capacity, Demands Financial Investment
In a request to the Pentagon, industry leaders have urged the defense department to modify its contracting approach to prioritize surge capacity in munitions production, as well as overall operational efficiency. This appeal was made during a House Armed Services Committee hearing on February 26 regarding the health of the U.S. defense industrial base.
David L. Norquist, president and CEO of the National Defense Industrial Association, emphasized the need for the Pentagon to incorporate surge capacity as a requirement in contracts. He noted that current contracting practices predominantly focus on efficiency rather than capacity, which could hinder the ability to rapidly increase production in times of crisis.
Norquist also suggested that the Pentagon should abandon its "efficiency-at-all-costs" mindset to make surge capacity a viable option. He explained that this would involve drawing from long supply chains and storing large parts to accelerate production lines, a strategy which, from a national security perspective, would be beneficial. However, Norquist cautioned that this approach should be strategically implemented, focusing on specific systems and items that may require surge production during times of conflict.
Eric Fanning, head of the Aerospace Industries Association, echoed this sentiment, advocating for the Pentagon to adopt a more thoughtful and calculated risk-taking approach to accelerate production, both in peacetime and wartime. Fanning also urged Congress to avoid continuing resolutions and other funding delays that harm new and small businesses, as these delays can discourage companies from doing business with the Pentagon, especially those within fragile supply chains struggling with inflation.
Witnesses reiterated their appeal from a similar hearing last year for the Pentagon and Congress to clarify demand signals to contractors, enabling them to make informed decisions about material and labor preparation, fostering a common understanding of surge capacity and its compensation. If the demand signal is unclear, companies have little incentive to maintain workforces in anticipation of future work.
The U.S. Department of Defense could transform its contracting mindset by adopting strategies that fundamentally shift procurement approaches, leverage partnerships, and enhance flexibility. This includes embracing mission-oriented and agile acquisition, fostering collaboration and innovation, streamlining decision-making and reducing bureaucracy, aligning strategy and budgeting, and learning from the acquisition model of Special Operations Command (SOCOM), where feasible. Such changes would enable the DOD to better support surge capacity and operational efficiency within the defense industrial base.
- The National Defense Industrial Association's president, David L. Norquist, proposed that the Pentagon should modify its contracting approach to prioritize surge capacity, suggesting a shift from the current focus on efficiency to incorporating surge capacity as a requirement in contracts.
- Eric Fanning, from the Aerospace Industries Association, underscored the importance of the Pentagon adopting a more thoughtful and calculated risk-taking approach to accelerate production, urging Congress to avoid funding delays that could dissuade companies, particularly those within fragile supply chains, from doing business with the Pentagon.
- Witnesses, including Norquist and Fanning, called for the Pentagon and Congress to clarify demand signals to contractors, enabling them to make informed decisions about material and labor preparation, and fostering a common understanding of surge capacity and its compensation to incentivize companies to maintain workforces in anticipation of future work.
