Supply Side Economics

The Governmental Accountability Office today released briefing slides from a presentation given to lawmakers last October on the Defense and Commerce departments' assessments of "supplier-base availability for future defense needs."

In its introductory letter to the chairmen of the Senate Banking, Housing and Urban Affairs economic policy and security and international trade and finance subcommittees, GAO notes:

Both DOD and Commerce conduct assessments of supplier-base availability for defense needs that generally focus on the next 5 years. Several offices within DOD and Commerce’s Office of Technology Evaluation have a role in assessing supplier-base availability, primarily conducting short-term assessments of selected sectors or existing weapon programs. In 2004, DOD’s Office of Industrial Policy conducted a one-time series of comprehensive DOD-wide assessments of supplier-base availability that forecasted 10-20 years into the future. According to DOD and Commerce officials, assessments of future supplier-base availability for defense needs beyond a 5-year time frame can have limitations, in part, because it can be difficult to predict technologies and whether investment in the supplier base will be needed to support these technologies. Recently, the National Research Council and an industry association recommended that DOD continually assess the supplier base from a more strategic perspective to include its availability for long-term defense needs. DOD has not acted on these recommendations; however, DOD plans to incorporate industrial-base considerations into its 2010 Quadrennial Defense Review to raise awareness of long-term, future, supplier-base availability for defense needs.

In fact, InsideDefense.com reported in late January:

The QDR notes the Pentagon recognizes the value of not only the U.S. industrial base but also the industrial capacities of allies. “We will continue to value our allies' capabilities, ensure that when they bid on U.S. contracts that they are treated fairly, just as we expect our firms to be treated fairly in international competitions, and deepen our collaborative effort to innovate against 21st century threats,” the report states.

In order for the defense industry to remain a source of strategic advantage well into the future, DOD and the nation require a consistent, realistic, long-term strategy for shaping the structure and capabilities of the defense industrial base, according to the QDR. Toward this end, the Pentagon is “committed to being more forward leaning in its ongoing assessments of the industrial base -- refocusing our efforts on our future needs, not just our past performance; working much more closely with the services to foster an integrated approach to the overall industrial base; and placing transparency and dialogue with industry at the forefront of our agenda.”