Defense Industrial Base:

An Overview of an Emerging Issue

NSIAD-93-68: Published: Mar 29, 1993. Publicly Released: Apr 30, 1993.

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Pursuant to a congressional request, GAO reviewed the: (1) existence of a viable U.S. industrial base to meet future defense needs; and (2) access to critical items and capabilities produced or controlled by foreign countries.

GAO found that: (1) the Department of Defense's (DOD) strategy to rely on free market forces to restructure the defense industrial base is not realistic, since DOD is responsible for developing and implementing defense policy and industrial base requirements; (2) many defense contractors do not have the experience needed to shift between commercial and military production; (3) DOD has greater expertise and access to defense industry related information to assess factors affecting the industrial base, such as international political developments, emerging military threats, and future development of defense-related technology and military doctrine; (4) although DOD is implementing guidance to ensure that critical defense capabilities will not be lost, it has not taken a proactive role in ensuring access to critical items and capabilities or assessed U.S. reliance on foreign sources for its defense needs; and (5) DOD systematic reviews did not maintain data on lower production firms that provide specialized technology, lacked information and criteria for determining acceptable levels of foreign dependence, and failed to address present and future U.S. competitiveness in critical technological areas.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: DOD has developed a realistic defense industrial base strategy that recognizes the need to take action to ensure the existence of critical technological and industrial capabilities to meet future defense requirements. DOD is establishing policy and criteria to identify and maintain such capabilities. Several action groups composed of high-level officials periodically brief service acquisition executives. The groups have prepared a handbook for use by the military services and DLA in: (1) determining the capabilities of industry to meet defense requirements; and (2) identifying circumstances under which DOD should take action to preserve essential capabilities. The handbook also sets forth DOD's general philosophy and its planning framework for developing and sustaining industrial capabilities. Comments from industry and DOD officials on the draft handbook (dated July 1995) have been received and considered, and the final version of the handbook has been approved and sent to the printers.

    Recommendation: The Secretary of Defense should develop a realistic strategy concerning the restructuring of the defense industrial base that recognizes the need to take action, whenever necessary, to ensure the existence of the critical technological and industrial capabilities needed to meet future defense requirements.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: DOD proposed legislation to revise certain statutory requirements for annual industrial base assessments and plans. According to DOD, the existing provisions of Chapter 148 of title 10, U.S. Code "require a huge commitment of resources in a downsized departmental budget," but if the legislative proposal is enacted, it would not increase DOD's budgetary requirements. Based on informal feedback, DOD officials believe its approach has been well-received and may be satisfactory. However, DOD has not addressed the reporting requirements of section 831(a) of the DOD Authorization Act for FY 1992-1993. DOD officials said that: (1) this omission was an oversight; (2) their intent was to address all statutory industrial base reporting requirements in their March 1995 letters; and (3) they will consult with the appropriate congressional committees regarding section 831(a). They could not provide a date.

    Recommendation: Because the Secretary of Defense remains accountable for the plan that was required by section 831(a) of the National Defense Authorization Act for fiscal years 1992 and 1993, the Secretary of Defense should consult with the Senate and House Committees on Armed Services to determine whether the plan is still needed in light of more recent legislative requirements.

    Agency Affected: Department of Defense


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