In a new report released today, the National Defense Industrial Association, partnered with Govini, gives the health and readiness of the defense industrial base a "C" grade, unchanged from last year.
Last year's report was the inaugural one in an effort meant to provide a comprehensive assessment of the industrial base.
In this year's report, NDIA writes that "the 'C' grade reflects a business environment that is characterized by contrasting areas of concern and confidence."
"It also reflects the state in which the defense industrial base entered the novel coronavirus (COVID-19) pandemic, which dramatically disrupted the daily lives of every American as well as the flow of American and global commerce," the document continues. "Continued deterioration in industrial security and the availability of skilled labor and materials emerged from the analysis as areas of clear concern."
According to the report, NDIA and Govini studied eight areas: demand, production inputs, innovation, supply chain, competition, industrial security, political and regulatory issues and productive capacity and surge readiness.
The report notes the vast majority of its data was collected before the pandemic lockdowns began, and the "final grades are based solely on data from before the COVID-19 pandemic." Still, the report finds the industrial base entered the pandemic in a "weakened state."
Six areas earned failing grades, matching last year's report. Industrial security was the lowest scoring one.
"Industrial security has gained prominence as massive data breaches and brazen acts of economic espionage by state and non-state actors plagued defense contractors and the entire U.S. economy in recent years," the report says.
In contrast, the competitive environment and demand were high scoring areas.
The report notes that though it makes conclusions on the health of the industrial base, it does "not make any policy recommendations, support any specific legislative or regulatory changes, or advocate for any targeted investments."
"We believe an unclassified report, like this one, will serve as an important annual touchpoint at the beginning of the policy cycle by providing trend analyses that demonstrate the results of changes in the strategic environment, economy, policies, and investments while ensuring a discussion of industrial base issues at the national level," NDIA adds.
In a call with reporters today, Hawk Carlisle, NDIA's chief executive, said the report is intended "to get the dialogue going."
"We'll get to conclusions and recommendations, but the key to the report is getting the information out there," he added.
The report also notes NDIA anticipated the COVID-19 pandemic will have "a measurable impact across the depth and breadth of the defense sector."
"How the defense industrial base weathers the pandemic will serve as an indication of its resilience and may point to structural adjustments to come," the report reads. "We will soon examine that data as we begin to work on Vital Signs 2022."
During the same call with reporters, Wes Hallman of NDIA said defense contractors have generally been more protected than commercial businesses during the pandemic, but that he still expects the industry to see consequences.
"Frankly, this has been a haven thus far, but really where the rubber's going to meet the road is when we get to post-pandemic and see who's been able to survive," he said.
Next year, "I expect to see some significant changes," Hallman added. "I don't expect them to be positive, but we'll see what the data bears."