The Pentagon’s top industrial policy official on Monday said new incentives are needed to ensure the largest defense contractors continue developing future technologies in the U.S. rather than abroad as the department goes after critical force modernization capabilities, such as hypersonics and artificial intelligence, to meet increasing power competition.

Eric Chewning, deputy assistant secretary of defense for industrial policy, told attendees at an Atlantic Council event the Department of Defense will look to policy reforms that allow for “better supplier management” to meet growing technological investment opportunities.

Eric Chewning, Deputy Assistant Secretary of Defense for Industrial Policy
Eric Chewning, Deputy Assistant Secretary of Defense for Industrial Policy

“Defense-industrial policy is the strategic effort to generate and convert economic power to fulfill military warfighting requirements now and in the future. It is the means for strengthening our industrial base. And it is a process that can be made more efficient through reform,” Chewning said. “To better support the warfighter, the rules of the game need to enable faster fulfilling of capability, more cost efficiency and an expansion of the industrial base to a broader set of technology providers.”

A recent DoD report on the defense-industrial base pointed to increasing global competition and a vulnerable supply chain’s negative effect on the department’s ability to deliver critical warfighting capabilities (Defense Daily, Oct. 4).  

Jeff Wilcox, Lockheed Martin’s [LMT] vice president for digital transformation, agreed with Chewning on a need for policy reform, which he said is required to ensure the defense industrial base is ready to handle the ongoing “Fourth Industrial Revolution.”

“I don’t believe there are commercial hypersonics programs. That’s really important that the government says we want to do these things, nobody in the commercial world is addressing those, so let’s fund them and address them,” Wilcox said.

Wilcox described the new industrial revolution, or “Industry 4.0”, as the “convergence of digital technologies, augmented reality, virtual reality, artificial intelligence, new materials, all of which leverage data as fundamentally a new commodity.”

Caralynn Nowinksi Collens, the CEO of UI Labs which leads DoD’s Digital Manufacturing & Design Innovation Institute, said the concern comes from the largest U.S. multinational companies receiving an increasing number of offers to lead technological innovations abroad.

“What we’re hearing from our partners is that we need to have an industrial policy. That, in fact, we, the U.S., are going to fall behind from a national security and economic standpoint if we don’t do something,” Nowinski Collens said.

Nowinski Collens said successful policy reforms for “Industry 4.0” will focus on building in incentives to shepherd data for hypersonics and AI projects from the design stage to the supply chain and through sustainment.

“There’s an incredible amount of data that is collected along this thread that allows us to make better insights, to better understand what is happening in our factories and our supply chains and ultimately raise the readiness and capabilities of our industrial base,” Nowinski Collens said.

Arun Seraphin, a Senate Armed Services Committee professional staff member, said lawmakers will be interested in acting on industry policy reforms that focus on national security impacts of the supply chain and address a hybrid development process for “Industry 4.0.”

“If you invoke the phrase ‘national security’ and the idea to do intelligent supply chain management, protection of the technologies that are going to shape national security in the future, preserve the need for the surge production of whatever gear we are going to need, then members get more interested,” Seraphin said. “It’s going to be a different model from where you perform the innovation, so whatever the technology is that you’re interested in next week I guarantee you it won’t be developed in a government-owned, government operated laboratory behind fences like things used to be done in decades past. It’ll be some strange combination of universities and small businesses with private sector money maturing these things.”

Wilcox added that the industrial policy concerns should extend beyond large companies, like his Lockheed Martin, to include consideration for small businesses to ensure supply chain stability.

“They have a lot of challenges on their hand, and entering the fourth Industrial Revolution is not what they wake up every morning thinking about. And yet, if they don’t, there’s a risk of getting left behind,” Wilcox said.