In response to President Donald Trump’s directive in July asking the Pentagon to assess the health and needs of the nation’s defense industrial base, the Aerospace Industries Association (AIA) has formed a working group of industry officials that is focusing on four pillars and 10 priorities it wants the Defense Department to address.

The pillars include “robust” and consistent defense spending, improvements in acquisition policy, workforce investments around emerging technical needs such as artificial intelligence, a security clearance process that works faster, and taking care of critical capabilities while investing in new technologies and taking advantage of the ongoing digital transformation, AIA says in a two-page white paper issued as part of its year-end luncheon with aerospace and defense media.

Dave Melcher, president and CEO of the Aerospace Industries Association. Photo: AIA
Dave Melcher, president and CEO of the Aerospace Industries Association. Photo: AIA

“Among our key advocacy points is that we need a defense budget large enough to buy back readiness capability lost to the BCA cuts,” David Melcher, the outgoing CEO of AIA, said at the luncheon address. The BCA refers to the 2011 Budget Control Act, which sets caps on both defense and non-defense spending that are constraining the DoD’s ability to keep with readiness and modernization demands.

“Also needed is a balance between today’s readiness and operational requirements and procurement and modernization investments for tomorrow,” Melcher said. “Regarding regulation, we believe the DoD should rescind or revise several policies that increase the price DoD pays for goods and services without appreciable national security benefit.”

Melcher, in a media roundtable following the luncheon, said that the industry understands that the chance to help shape the government’s policies toward the industrial base is a “maybe once in a decade opportunity to talk about what are the issues with the supply chain.” He added that “many companies are down to single points of failure and I think DoD would acknowledge there are some single points of failure within parts of the supply chain.”

The Industrial Base Working Group, as AIA calls it, works among industry and with the DoD and is focused on policy, John Luddy, vice president of National Security for AIA and the organization’s point man for the effort, said during the roundtable. He said individual companies are also contributing information directly to DoD to help the department craft its report for the White House.

Melcher said the working group is “trying to get the whole of industry picture,” which includes its members that are further downstream in the supply chain. He also said the group is working with the Department of Commerce related to the industrial base assessment.

Under the pillar of “streamlined acquisition policy,” AIA outlines three priorities, including contract process reform such as restrict the use of lowest price technically acceptable contracts, more use of multi-year procurements, and simplifying the contract audit processes. The working group also wants industry to have more flexibility in how it spends its own research and development (R&D) dollars, and to have protections for their intellectual property and data.

Melcher during the roundtable noted that the Deputy Defense Secretary Patrick Shanahan and the Pentagon’s new acquisition chief, Ellen Lord, have backed off requirement of the former Obama administration to scrutinize industry’s independent R&D spending. Sometimes R&D results in failing, Melcher said, noting that a government official in charge of signing off on company-funded R&D might be risk averse and not approve of the spending.

The priorities under the “robust, balanced and stable defense spending” pillar are straight forward. They include strong budgets to buy back readiness, achieve balance between readiness and procurement needs, and provide stability so that DoD and industry can plan with confidence.

“For more than a decade, funding has been inadequate and unreliable,” the white paper says. “Congress must provide budget stability, so that our companies can ensure a strong and resilient supply chain.”

The Pentagon’s report stemming from Trump’s executive order for a whole of government assessment of the defense industrial base is due in April.  

Melcher said the directive “is starting to ask the right questions,” adding that, “We hope the assessment, and its ensuing policy recommendations will provide a strong roadmap for strengthening industrial base health.”

In addition, the white paper outlining its work in response to Trump’s executive order, AIA also released an eight-page report on technological advances in large unmanned aircraft systems (UAS) and the need for regulatory authorities to keep up and not be an obstacle to U.S. leadership in this area.

“The picture for widespread use of large UAS is becoming clearer,” says the report, Unmanned Aircraft Systems: Technology Acceleration & Regulatory Challenges. “Beyond the current military operations, there is increasing interest from the commercial sector. The potential ecosystem includes: freight delivery, flying taxis, broadband internet delivery and eventually passenger aircraft.”

Melcher also highlighted some of the positive developments this year for the aerospace and defense industry, including exports equal to or “slightly better” than the $90 billion in 2016, the Trump administration’s commitment to return to the Moon as part of U.S. space exploration efforts, a defense authorization bill to “significantly increase defense spending,” and potential tax reform legislation that will lower the corporate tax rate.

AIA continues to press for export control reforms to help U.S. manufacturers improve their international sales opportunities and protect jobs.

“We don’t want to cede whole markets to foreign competitors who have developed some of the very industries we were trying to prevent by not selling ours,” Melcher said during the roundtable. He said the Trump administration “seems inclined to want to revisit” some of the rules restricting defense exports.