The Pentagon's acquisition chief has approved a new enterprise policy for managing the potential loss of manufacturing sources amid broader concerns about declining electronics production and other supply chain shortfalls.
The new instruction for "Diminishing Manufacturing Sources and Material Shortages Management" was approved Nov. 5 by Ellen Lord, under secretary of defense for acquisition and sustainment.
The document makes it Defense Department policy to "establish and implement risk-based, proactive DMSMS management throughout the life cycle of all DOD items," as well as "evaluate all DOD system designs and redesigns for potential DMSMS issues that could arise during the life cycle of DOD items."
It further instructs DOD organizations to "implement resolutions, if necessary, to minimize or eliminate risks and negative impacts (e.g., cost, schedule delays, readiness)," while also working to "implement improvements to DMSMS management processes throughout the life cycle of all DOD items across the DOD enterprise."
Jerry McGinn, a former Pentagon industrial policy official, said the instruction is "a pretty big deal," as it represents the first DOD obsolescence policy since 1974. McGinn is currently executive director of George Mason University's Center for Government Contracting.
"This definitely reinforces ongoing supply chain and industrial policy efforts," he told Inside Defense. "I think that the most practical effects are that it better defines roles and responsibilities so DOD as an enterprise can then use it to tackle specific problem areas such as electronics and materials."
Most DOD weapon systems have service lives that extend for decades, often well past the life cycle of many components that go into those systems, according to Adelica Cliffe, partner at law firm Crowell & Moring.
"There has been a lot of focus on national security concerns related to new and emerging technologies," she told Inside Defense. "This is the other side of the coin."
DMSMS is among 10 "risk archetypes" threatening the U.S. manufacturing and defense industrial base, according to the Trump administration's 2018 industrial base report.
The report specifically highlights electronics as a major problem. The U.S. Army Aviation and Missile Research, Development and Engineering Center estimates 70% of electronics bought by DOD are obsolete prior to system fielding, according to the report.
"Trusted foundries, obsolescence, diminishing manufacturing sources and material shortages, and counterfeit issues are common to the broad defense electronics sector and prevalent for current and future radar systems, as well as systems in sustainment," the report states.
During an event hosted by MITRE Engenuity last week, Lord said the United States makes up just 12% of global microelectronics production, with the share expected to decline to the single digits by 2030. She argued "we in defense need to lead" to restore domestic electronics production.
Both Cliffe and McGinn said the new DMSMS instruction could potentially fix what has traditionally been a "reactive" approach to diminishing manufacturing sources, with electronics likely being a major focus.
"Obsolescence has never received enough attention because it has been always been handled program by program and service by service," McGinn said. "I definitely think that a new DOD-wide obsolescence policy provides an opportunity to take a more proactive and holistic approach to addressing obsolescence across the department."
The instruction formalizes a "DOD DMSMS Working Group" under the assistant secretary of defense for sustainment. It also instructs the deputy assistant secretary of defense for industrial policy to "address critical material shortages" through the Priority Allocation of Industrial Resources Task Force, which ensures industrial resources meet DOD's operational demands using Defense Production Act authorities.
The instruction also establishes "DMSMS Management Procedures" for program offices. It directs them to include provisions in contracts and request for proposals requiring companies to be proactive about managing manufacturing sources, report information needed for government oversight of the issue, and provide technical data rights necessary to manage DMSMS and resolve issues if necessary.
The new instruction is the latest in a trend of federal actions aimed at ensuring supply chain security mitigations are a part of an agency's acquisition evaluation, according to Cliffe.
"The general message to contractors is that it is imperative to get your arms around supply chain risk mitigation, because your customer agencies are going to be looking at supply chain management much more closely and through a bunch of different angles, and this is just one of them," she said.