Presidential Executive Order on Assessing and Strengthening the Manufacturing and Defense Industrial Base and Supply Chain Resiliency of the United States

A key initiative undertaken by the Trump Administration is to issue a Presidential Executive Order for the expressed purpose of assessing and strengthening the manufacturing and defense industrial base and supply chain resiliency of the United States. This is an issue that is gaining increasing importance for the Department of Defense and its ability to ensure that it has the materials that the Defense Department will need when the next world crisis erupts. To better understand this, it is important to take a look back so we can understand the need for a forward-looking effort such as this.

In CY 2001, we entered into a war in Afghanistan as a direct result of the attack on the homeland on 9/11. Up to that time the United States military was trained, manned and equipped to fight a war in Europe or Asia against a near peer adversary that would allow us to make use of our advanced technology and weapons. The war we entered into started with our Special Operations personnel riding on horseback, fighting a somewhat unsophisticated enemy, while directing bomb strikes with JDAM “smart bombs”. As the war progressed and we entered the Iraqi theater the industrial base in America began a rapid and broad expansion in both low-tech and hi-tech materials to support the war. Everything from small arms ammunition production to the development of the MOAB, new uniforms and camouflage, to body armor and vehicle armor, IED detection and advanced medical treatment equipment to keep the battlefield wounded alive long enough to make it to a medical facility greatly reducing overall casualty rates. Contracts for big business, small business and their associated subcontractor supply chains were plentiful and financially rewarding. Companies were re-investing in technology, advanced were rushed to the battlefield as soon as practical and all were benefiting from the serge.

As always happens we changed Administrations and the policies for pursuing the war and the pace at which it was to be pursued changed. With the change, there began a slow but steady reduction in the amount of materials that were being consumed by the Defense Department. With the slowdown companies were forced to reduce their operations. The impact on big business was noticeable but the impact on small business and newly emerging businesses was catastrophic. The attitude across the Department was one of ‘indifference’ to the struggle of businesses who had grown to support the department with key material items. They now found the Department unwilling or unable to provide the on-going support necessary to insure their continuation as a viable business entity. Some key material supplies have been identified and picked up in sustainment programs, but most have not and if they were not able to find a corresponding opportunity in the commercial sector they simply went away.

The Trump Administration has recognized that our industrial capacity to wage war has been diminished by the actions of the Department of Defense and has chosen to take actions that we have not seen in past Administrations to improve the overall readiness of the force through industrial base sustainment. In the Executive Order, the President has highlighted the following:

The loss of more than 60,000 American factories, key companies, and almost 5 million manufacturing jobs since 2000 threatens to undermine the capacity and capabilities of United States manufacturers to meet national defense requirements and raises concerns about the health of the manufacturing and defense industrial base.  The loss of additional companies, factories, or elements of supply chains could impair domestic capacity to create, maintain, protect, expand, or restore capabilities essential for national security.

What is clearly understood by those in the manufacturing sector is that once an item is no longer procured, even at a reduced rate, the supply chain for that item will be significant altered. If the item relies on components that require long lead times the significance of the loss is magnified. Even when federal contracts state the importance of acquiring an item as a high priority; if the manufacturer is unable to re-establish the supply chain because the resource needed has been diverted to commercial requirements the Department can insist on its priority but if the resource is simply not available the Department will be deprived. Some supply chain companies exist solely to manufacture a piece or part or special tooling needed for the military supply chain. They are the very first to feel the impact of a reduction in military procurement.

Section 2 of the Order directs:  

The “Assessment of the Manufacturing Capacity, Defense Industrial Base, and Supply Chain Resiliency of the United States.  Within 270 days of the date of this order, the Secretary of Defense, in coordination with the Secretaries of Commerce, Labor, Energy, and Homeland Security, and in consultation with the Secretaries of the Interior and Health and Human Services, the Director of the Office of Management and Budget, the Director of National Intelligence, the Assistant to the President for National Security Affairs, the Assistant to the President for Economic Policy, the Director of the Office of Trade and Manufacturing Policy, and the heads of such other agencies as the Secretary of Defense deems appropriate, shall provide to the President an unclassified report, with a classified annex as needed, that builds on current assessment and evaluation activities, and:

(a) identifies the military and civilian materiel, raw materials, and other goods that are essential to national security;

(b) identifies the manufacturing capabilities essential to producing the goods identified pursuant to subsection (a) of this section, including emerging capabilities;

(c) identifies the defense, intelligence, homeland, economic, natural, geopolitical, or other contingencies that may  disrupt, strain, compromise, or eliminate the supply chains of goods identified pursuant to subsection (a) of this section (including as a result of the elimination of, or failure to develop domestically, the capabilities identified pursuant to subsection (b) of this section) and that are sufficiently likely to arise so as to require reasonable preparation for their occurrence;

(d) assesses the resiliency and capacity of the manufacturing and defense industrial base and supply chains of the United States to support national security needs upon the occurrence of the contingencies identified pursuant to subsection (c) of this section, including an assessment of:

(i) the manufacturing capacity of the United States and the physical plant capacity of the defense industrial base, including their ability to modernize to meet future needs;

(ii)   gaps in national-security-related domestic manufacturing capabilities, including non-existent, extinct, threatened, and single-point-of-failure capabilities;

(iii)  supply chains with single points of failure or limited resiliency, especially at suppliers third-tier and lower;

(iv)   energy consumption and opportunities to increase resiliency through better energy management;

(v)    current domestic education and manufacturing workforce skills;

(vi)   exclusive or dominant supply of the goods (or components thereof) identified pursuant to subsection (a) of this section by or through nations that are or are likely to become unfriendly or unstable; and

(vii)  the availability of substitutes for or alternative sources for the goods identified pursuant to subsection (a) of this section;”

The importance of having a discussion with those Federal agencies that you do your procurements business with cannot be overstated. It is important that your contracting folks reach out to their federal counterparts and that pass along the impact and importance of understanding how your business works and why this issue is important to the overall health and financial stability of your company. That is what this Executive Order is looking to gather data on… and it is incumbent on industry to make sure the right data is pushed up rather than waiting for it to flow down.

The McKeon Group of experts in government procurement and contracting is available to you to assist with any requirements you may have in this regard.