Defense Industrial Base:

Integrating Existing Supplier Data and Addressing Workforce Challenges Could Improve Risk Analysis

GAO-18-435: Published: Jun 13, 2018. Publicly Released: Jun 13, 2018.

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makm@gao.gov

 

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DOD relies on a network of suppliers (the defense industrial base) to provide the materials and equipment it needs to develop weapon systems.

DOD is required to maintain a data repository of industrial base suppliers to help provide insight about potential risks to the base, such as relying on foreign suppliers. However, DOD hasn't been able to create this repository, partly due to problems it has accessing sensitive supplier data.

DOD is working towards a solution to collect supplier data and analyze industrial base risks. We recommended that DOD resolve ongoing data access problems before further investing in current efforts.

Examples of Risks Facing the Defense Industrial Base

Icons of examples of defense industrial base risks, such as obsolete items, limited production capacity, and foreign dependence.

Icons of examples of defense industrial base risks, such as obsolete items, limited production capacity, and foreign dependence.

Additional Materials:

Contact:

Marie A. Mak
(202) 512-4841
makm@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

What GAO Found

GAO found that the Department of Defense (DOD) takes a dispersed approach to identify risks to the industrial base that draws on data from several DOD components and acquisition program offices. The figure below highlights examples of industrial base risks that DOD faces.

Examples of Risks Facing the Defense Industrial Base

Examples of Risks Facing the Defense Industrial Base

The Manufacturing and Industrial Base Policy (MIBP) office is DOD's focal point for industrial base issues. MIBP has two data systems that together could meet DOD's requirement for a data repository that centrally identifies available supplier data necessary to conduct industrial base analysis. However, GAO identified certain challenges that have prevented a comprehensive approach to department-wide analysis of risks. For example:

MIBP's data systems do not fully leverage existing data from program offices on the companies that provide parts at the lower tiers of the supply chain, among other things. These data are not currently collected in a standardized format, but would enable MIBP to meet its goal to gain better insights into the supply chain.

MIBP relies on contract staff to augment its workforce; however, MIBP officials have determined that these contractors may not access business-sensitive data needed to build its systems to facilitate industrial base analysis.

MIBP acknowledges these issues, but has not yet determined a solution. Federal Standards for Internal Control call for agency management to utilize quality information and to ensure a personnel mix with the requisite capabilities needed to achieve the agency's objectives. Without addressing these challenges, MIBP is likely spending resources on systems that do not meet its repository requirement or leverage existing data.

To mitigate risks, MIBP administers investment programs that can be used to help sustain or expand the defense manufacturing and industrial base. GAO found that these programs primarily invested in projects to (1) establish economically viable domestic sources of supply, (2) maintain existing suppliers, or (3) develop lower-cost or more efficient manufacturing processes.

Why GAO Did This Study

Each year, DOD spends billions of dollars acquiring and sustaining weapon systems to meet U.S. national security objectives. DOD relies on an extensive, multi-tiered network of suppliers that make up the defense industrial base to provide the components, subsystems, raw materials, and equipment to develop and sustain these weapon systems. Ensuring that these suppliers can provide products and services at the time, quantity, and quality DOD needs is essential to meeting national security objectives. MIBP is DOD's focal point for assessing and mitigating department-wide industrial base risks.

GAO was asked to review DOD's efforts to ensure a viable defense industrial base. This report addresses DOD's approach to identify industrial base risks and its investments to address those risks. GAO reviewed DOD's guidance for industrial base assessments; analyzed industrial base assessments conducted by program offices, military departments and MIBP; reviewed MIBP's efforts to share supplier data; and reviewed documents for all 33 completed investment projects funded by MIBP's investment programs from fiscal years 2014 through 2017.

What GAO Recommends

GAO recommends that DOD make better use of existing supplier data and identify the appropriate workforce mix needed to work with business-sensitive data. DOD partially concurred, but noted that it is taking steps to identify and integrate existing supplier data and is evaluating staff resources for safeguarding business-sensitive data.

For more information, contact Marie A. Mak at (202) 512-4841 or makm@gao.gov.

Recommendations for Executive Action

  1. Status: Open

    Comments: DOD partially concurred with this recommendation, noting that it plans to takes steps to identify and incorporate available supplier data from across the department into its defense industrial base data system, but noted that they only planned to rely on one data system, DIBNow, instead of continuing to develop its second data system, the Defense Planning Guidance Input and Retrieval System. The Industrial Policy Office, formerly Manufacturing and Industrial Base Policy, has taken some steps to improve sharing of industrial base analysis information across the Department, such as establishing a web repository of industrial base assessment information and subject matter expert contacts. However, these sharing tools continue to rely primarily on summary narratives and Industrial Policy has not incorporated program office lower-tier supplier data into this web repository or DIBnow. Industrial Policy officials said that program office supply chain information is proprietary and cannot be incorporated into DIBnow, which is built and maintained by a contractor. Industrial Policy officials have determined that a contractor cannot have access to proprietary information. We continue to believe that incorporating existing program office supplier information into DIBnow is essential for DOD to achieve its goal of proactive industrial base risk analysis. Industrial Policy should continue to pursue risk reductions solutions, such as non-disclosure agreements and/or data masking, to make better use of existing lower-tier supplier information from program offices.

    Recommendation: As MIBP moves forward with its plans to improve data collection and analysis, the Deputy Assistant Secretary for Defense, Manufacturing and Industrial Base Policy should determine a solution to make better use of existing lower-tier supplier information from program offices. (Recommendation 1)

    Agency Affected: Department of Defense: Office of the Under Secretary of Defense for Acquisition, Technology and Logistics: Office of Manufacturing and Industrial Base Policy: Deputy Assistant Secretary of Manufacturing and Industrial Base Policy

  2. Status: Closed - Implemented

    Comments: DOD partially concurred with this recommendation, acknowledging the challenges and limitation of using support contractors to handle business-sensitive proprietary data, but noted that any changes to the workforce mix will need to be aligned with DOD's strategic plan. In 2018, DOD's Industrial Policy office, formerly Manufacturing and Industrial Base Policy, assessed its industrial base analysis personnel needs and alignment across industrial sectors. As a result of this assessment, DOD's fiscal year 2020 budget request included a request for 14 additional government full time equivalent positions to support industrial base analytics capabilities. Further, Industrial Policy is leveraging all available avenues to increase the number of Industrial Policy staff that are able to access and analyze proprietary information. For example, Industrial Policy utilized a pilot program established by Section 235 of the National Defense Authorization Act for fiscal year 2017 that allows Federally Funded Research and Development Centers (FFRDCs) to access proprietary information. Industrial Policy also plans to leverage government detailees and internship programs to increase the number of personnel that can access proprietary data for industrial base analysis.

    Recommendation: The Deputy Assistant Secretary for Defense, Manufacturing and Industrial Base Policy should identify the appropriate workforce mix with the requisite skills and capabilities needed to enable MIBP to collect business-sensitive proprietary data to achieve the repository requirement and MIBP's goal of proactive analysis. (Recommendation 2)

    Agency Affected: Department of Defense: Office of the Under Secretary of Defense for Acquisition, Technology and Logistics: Office of Manufacturing and Industrial Base Policy: Deputy Assistant Secretary of Manufacturing and Industrial Base Policy

 

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