Changing times call for Army and industrial base to collaborate on solutions
From The Army Acquisition Executive
The Honorable Heidi Shyu
As we enter a new calendar year, the Army faces challenges of an evolving fiscal reality and the transition from wartime production to peacetime requirements. The Army and its industrial base must work together to address these issues head-on. The hard truth—sustaining readiness in this fiscally constrained environment—necessarily means fewer investments in the future. Budget uncertainty complicates the procurement landscape, but communication and cooperation will allow the Army and industrial base to meet our respective goals.
Although the organic and commercial industrial base sectors are often discussed as distinct communities, public-private partnership at Army depots and essential facilities is a potential core strategy to ensure that parts and materials are available to sustain platforms and equipment at appropriate readiness levels.
Defense spending is projected to make up only 12 percent of the federal budget in FY17, down from 17 percent in FY13. Those numbers are a world away from the 49 percent of the federal budget consumed by defense during the 1960s. At the same time, the budget for research, development and acquisition (RDA) is declining faster than the overall defense budget.
Nothing highlights this more concretely than the Army’s total obligation authority (TOA) for FY14, which, at $129.7 billion, is 15 percent lower than the FY12 Army TOA of $152.6 billion. Compare this to the FY14 Army RDA budget of $23.95 billion, which is down an amazing 28 percent from the FY12 RDA budget of $33.2 billion. A Nov 28, 2013, article in The Washington Post profiled members of the West Point Class of 2014 and gave a compelling description of the challenge. A 22-year-old cadet wisely noted that the key question is not how to do more with less, but how to determine “what we’re going to do and what we’re going to do well.” In other words: What’s going to be good enough?
Procurement budgets naturally contract after a war. The end of the Cold War saw a wave of consolidation, mergers and acquisitions in the commercial base. Although industry consolidation reduced duplication and redundancy, it also resulted in many of today’s critical defense assets being manufactured by only a limited number of firms. As the U.S. manufacturing sector has decreased overall, defense manufacturing has taken on a greater significance for remaining firms. But while there are fewer large players than in previous drawdowns, there has been a proliferation of small businesses working as subcontractors—providing engineering services, doing research and development, and manufacturing specialized components.
Today’s industrial base includes a large population of highly skilled technical and knowledge workers, many of them employed by specialized third- and fourth-tier subcontractors. Keeping these skilled employees within the industrial base has the added benefit of enhancing support for the Army’s small business partners. The rapid decline in our RDA budget creates significant challenges for small companies that must diversify quickly, but the Army has met its 25 percent small business goal for the past three years. This helps small businesses continue to innovate and deliver products and services to our warfighters.
It is just as important to note the opportunities created by the coming drawdown. The Army and industry can begin a new level of dialogue around modernization, which technologies best meet national security needs and how to integrate new technologies into existing infrastructure. Although the organic and commercial industrial base sectors are often discussed as distinct communities, public-private partnership at Army depots and essential facilities is a potential core strategy to ensure that parts and materials are available to sustain platforms and equipment at appropriate readiness levels.
As the Army assesses and identifies capabilities and competencies at its depots and arsenals, the commercial base is a vital stakeholder. The commercial base, in particular, is well-positioned to help the Army better use commercial off-the-shelf products and production techniques that can yield new efficiencies and increase the buying power of the defense dollar.
Consider an example from Program Executive Office Ammunition: Staff implemented a long-term strategy for recurring procurement of artillery and mortar components. A $2.7 billion small business set-aside strategy eliminated the need for more than 100 separate market surveys, synopses and requests for proposals, and reduced average delivery time from 18-24 months to 45-60 days. This efficient new procurement strategy will help the Army avoid $60 million in costs while supporting small business.
Multiyear procurement (MYP) is another proven strategy for lowering cost to the taxpayer while reducing financial uncertainty for industry. The CH-47 Chinook MYP has saved taxpayers nearly $500 million to date while enhancing the environment for sharing lessons learned between the Army and industry, and incentivizing quality assurance.
As President Ronald Reagan observed, “no weapon in the arsenals of the world is so formidable as the will and moral courage of free men and women.” We remain committed to providing the best equipment to the warfighter at the best value for the taxpayer. Painful choices will have to be made on force structure, readiness and modernization. The Army’s desired end goal is to meet the nation’s and world’s security needs while we invest in emerging technologies to develop the next generation of capabilities.
By AMC Public Affairs
WASHINGTON — Lt. Gen. Patricia McQuistion, deputy commanding general of Army Materiel Command, took questions from Army personnel, industry and academia during a panel discussion at the annual meeting of the Association of the United States Army Oct. 22.
The first question addressed to McQuistion was how the Organic Industrial Base and readiness were impacted by sequestration and the Budget Control Act.
“In January 2013, we were told to cancel all third and fourth quarter depot operations and this caused delays in many of our efforts. We had to redirect work to depots and arsenals that did not have as much work,” said McQuistion.
“It placed havoc on our ability to plan and work effectively, and it caused an increase the rates we have to charge our customers,” she stated.
In terms of reset and the lack of Oversees Contingency Operations funding, AMC reset less equipment after the Budget Control Act and Sequestration. Using aviation as an example, AMC reset 111 fewer aircrafts than originally planned for; the rest were shifted to fiscal year 2014, McQuistion explained.
“On the tactical side, the ability for Soldiers to order parts and receive them affected readiness,” she continued.
And then AMC had to furlough the workforce at the depots and arsenals; yet the workforce was still able to reset all of the aircraft needed for combat, she added.
McQuistion also noted the importance of revitalization of the infrastructure at Organic Industrial Bases, many of which are in need of repairs.
“We do have to commit to the revitalization of the OIB,” she stated frankly.
Other questions from the audience revolved around science and technology and integrating industry’s platforms to the Army, and policy issues tangled in creating a Program of Record.
“We do have Prototype Integration Facilities, and they do a lot of work in prototyping technologies for special operations and active Army,” said McQuistion. “We see what sticks and what doesn’t and what will become a Program of Record.”
McQuistion cited the Army’s Mobile Parts Hospital as an example of taking an industry principal and applying it to the Army. The Army’s Mobile Parts Hospital provides treatment to a vehicle by being able to create a fully dense metal automotive part, replacing a broken part while in the field. To the Soldier this means there is no longer a need to wait weeks to have a part fixed on a vehicle, but a matter of hours.
The panel was hosted by Heidi Shyu, Assistant Secretary of the Army for Acquisition, Logistics and Technology. Other panelists were Lt. Gen. James O. Barclay III, deputy chief of staff, G-8; Dr. Robie Samanta Roy, professional staff member for the Senate Armed Services Committee; Kevin Gates, professional staff member for the House Armed Services Committee; Angela Messer, executive vice president of Booz Allen Hamilton; and Johnny Barnes, vice president of Intelligence at IBM.