Across the analyst and policy community, there is a widespread belief that U.S. defense supply chains are not resilient enough and that raises fears of national security risks.
The “big six” defense contractors come to mind when most people think about the Defense Industrial Base, but in reality, this critical ecosystem includes over 200,000 companies – all of whom are facing a watershed moment when it comes to supply chain resilience.
Outside of the big six, the hundreds of thousands of organizations and facilities and Tier 2 and Tier 3 suppliers that the Department of Defense relies on to provide vital materials, products and services have shockingly little insight into their supply chains.
Indeed, across the analyst and policy community, there’s widespread consensus that U.S. defense supply chains are not resilient enough.
This poses serious concerns for national security, the continued support of our warfighters and maintaining our competitive standing on the world stage.
There are countless emblematic examples of how opaque supply chains across the DIB can percolate into crises – from delayed deliveries of F-16Vs to parts scarcity for the F-35s, labor shortages disrupting critical deliveries to Ukraine and resulting ammunition shortages.
As new momentum in Congress adds to the growing inertia behind supply chain reform across the entire U.S. federal government, the DIB faces a reckoning.
The status quo has created risk across the entire defense ecosystem
DIB supply chain management to date has been largely isolated to single, point-in-time touchpoints. Suppliers generally know who they’re receiving goods from. They know when they receive the goods; They know how much they cost but they haven’t validated any information outside of that and have little knowledge of the larger chain of parts and suppliers.
Many of the largest corporations and government agencies have already recognized the need for supply chain resilience – and have made the accompanying investments. But the DIB has remained relatively insulated because of perceived barriers in cost, data and policy (namely contract privity) in the absence of a clear mandate.
This delay has led to several instances of substandard or adversarial goods entering critical supply chains, including Chinese permanent magnets in weapons systems and Russian minerals used to produce ammunition. Outside of specific parts, CRS points to factors like inadequate manufacturing capability and misaligned incentives that have created systemic vulnerabilities in DIB supply chains.
And a recent GAO report quantified the wide span of risk types, including fragile, single- and sole-source suppliers, unstable markets, capacity-constrained suppliers, foreign dependencies, manufacturing source and material shortages, gaps in U.S.-based talent, the steady deterioration of U.S. infrastructure and inadequate cyber product security.
The evolving risk landscape has raised alarm on Capitol Hill
Recent actions from Congress are sending strong demand signals to the DIB. The House Armed Services Committee Chairman’s Mike Rogers’ (R-AL) Mark of the FY2024 NDAA, for example, recognizes the urgent need to secure the supply chains supporting the DIB, saying “supply chain visibility is a critical first step to identifying vulnerabilities and developing alternate and secure sources of strategic goods, components, and materials.”
The new NDAA language also implicates a maturing legislative and regulatory framework in the DIB’s responsibility to act now. Citing supply chain tracking and risk management requirements like those in Sections 857, 889, 860 and 5949, as well as other policy updates such as DFARS 252.239-7018, the HASC not only recognizes supply chain visibility as a current requirement, but also notes that the requirement “is likely to increase in the future.”
Across the entire government, we’re witnessing a collective recognition of the potential for adversarial sabotage and subversion and the rapid assembling of the makings of a policy framework that extends from federal legislation to individual agency contracting language.
This movement is only the beginning of a complete paradigm shift. Efforts to date only scratch the surface on the inevitable tidal wave of supply chain reform coming for the DIB.
The DIB doesn’t have to reinvent the wheel and actually has a lot to gain
The first step towards achieving supply chain visibility and ultimately resilience is to understand the perceived barriers – the most imposing of which is contract privity laws. Because of these laws, the DOD has not always required information about sub-tier suppliers, however there’s ample precedent for imposing requirements that don’t infringe on contract privity, such as the Buy American Act, the Berry Amendment and the Specialty Metals Clause.
Outside of the issue of contract privity, what are perceived as cost and data barriers actually offer opportunity for long-term operational resilience, competitive advantage and cost savings. And to achieve these gains, we don’t need to reinvent the wheel. The private sector has already developed and deployed advanced AI to solve data and cost challenges for civilian industries and government agencies.
A rising tide lifts all boats
The compounding complexity of our global economy demands a collaborative approach that’s led by technology. Large corporations and government agencies alike have already leveraged revolutionary AI to save millions and mitigate serious vulnerabilities in their supply chains.
But, of course, that doesn’t happen overnight. There will undoubtedly be a period of investment, particularly as the DIB implements capabilities to overcome the difficult but necessary challenge of supply chain mapping down to part and item level. After that, however, we will see incredible returns to compliance, operations, national security and economic resilience.
As the entire DIB’s supply chain resilience matures and we implement cost savings measures like embedded spend programs, we have the opportunity to realize economies of scale that offset compliance costs.
The DIB is uniquely interconnected and interdependent. And while that fact has made this ecosystem uniquely vulnerable to supply chain attacks, it also creates a unique opportunity to build a transparent network of frictionless supply chains, materially increasing the speed and decreasing the cost of our most critical systems.
Carrie Wibben is the president of Exiger Government Solutions. She is a former U.S. Army officer and served as deputy director of the Defense Counterintelligence & Security Agency. Wibben was also the principal deputy for counterintelligence, security and law enforcement in the Office of the Under Secretary of Defense for Intelligence & Security. Previously, she held senior positions at the Office of Management and Budget, Executive Office of the President, and the Office of the Director of National Intelligence.
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