By Emelie Rutherford
The Pentagon is getting underway with a survey of defense firms of all shapes and sizes that is intended to ensure its policies “cultivate a healthy industrial base,” a top official said.
Deputy Defense Secretary William Lynn said the survey is vital to the Pentagon’s efficiencies initiative–which is intended to wring savings out of the Defense Department during the federal fiscal crunch–as military contractors adjust in response to the current “inflection point” in defense spending.
The survey is being led by Lynn, Pentagon acquisition chief Ashton Carter, and defense industrial policy director Brett Lambert. The effort will be detailed because the military industrial base in not a monolithic entity, Lynn recently told a Washington, D.C., gathering of the Professional Services Council (PSC) trade group.
“Our survey will go sector-by-sector, and tier-by-tier, to assemble a long-term picture of what policies in each instance will help the (Defense) Department fulfill its requirements,” Lynn said Jan. 30, according to a newly released transcript. “This detailed review will inform our budget decisions, our acquisition decisions, and our industrial policy. It will also help us determine what stake the department has in mergers, acquisitions, and industry consolidation.”
Lynn noted that difference in maturity of defense industrial sectors, ranging from the established shipbuilding and tracked-vehicles areas to the emerging unmanned-aerial- vehicle and cyber-security sectors.
“More so than before, sectors are intertwined, with cross program dependencies that are often hard to see at a policy level because we have little visibility below the level of the primes,” he said.
Thus, the survey, Lynn said, will look beyond the top tiers of the industrial base to third-and-fourth-tier suppliers. “We will consider supply chain security,” he said. “We will examine what global sourcing and financing means for our security and the structure of the industry. And we will explore how we can create enduring value for the taxpayer in each sector.”
While in theory the government defines requirements and industry fulfills them, Lynn acknowledged that in practice the Pentagon’s needs “may not match the existing industry structure.”
“A key question for our review is how to calibrate the industrial capacity of specific sectors to meet future demand,” he said. “A related challenge is how to ensure value in sectors where competition is constrained.”
Lynn, Raytheon‘s [RTN] former senior vice president of government operations and strategy, said the Pentagon must ensure the future industrial base meets warfighters’ needs at acceptable cost to the nation.