SECURING THE BASE


diversification


elsewhere


[beyond


DOD] will have a much harder time,” said Richard Aboulafia, vice president of analysis at the Teal Group Corp., a Virginia-based consultancy.


Aboulafia added that the Pentagon, in its examination of the IB, might want to emphasize individual companies on a case-by-case basis instead of taking a sector-by-sector approach, because there is


significant


diversity within sectors.


One company in a given sector might be diversified with commercial products or multiple defense programs, whereas another may not, he explained.


At the same time, Broitman noted, an IB issue could emerge regarding a product available in parts of the world, but that the United States would like to ensure is produced domestically.


Another analyst wondered if single points of failure might, in reality, merely translate to market price increases for particular products.


“A single point of failure may become a price increase because there is almost always someone who will make some- thing if the price is right,” said Benjamin H. Friedman, senior


fellow in defense


and homeland security studies at the Cato Institute, a Washington, DC-based think tank.


Friedman said globalization and the “net- ting” together of markets are likely to make DOD less dependent on one par- ticular source of supply. He emphasized that the free-market would is well suited to address most IB issues.


“Te more technically difficult or complex it is to produce something, the more we should worry about an ability to make it at low cost,” he added.


18 Army AL&T Magazine January–March 2014 KNOWLEDGE BASE


Harrow Miller, a heavy mobile equipment mechanic in the Turbine Drive Train Division at Anniston Army Depot, AL, assembles an AGT 1500 engine. Maintaining specialized skills in the IB, both organic and commercial, is a central concern for DOD. (Photo by Jennifer Bacchus, U.S. Army Materiel Command)


MITIGATION STRATEGIES Mitigation strategies also are a large part of the IB policy equation, wherein the Pentagon employs a particular approach to foster competition,


tain production or identify key areas of needed investment.


Such strategies may involve DOD invest- ment in a particular product or area in order to preserve the supply chain and critical core capabilities.


DOD recognizes its responsibility to maintain a robust IB for the long term and to enhance industrial capacity “by investing in those defense unique items


that will


support future acquisition sus-


programs,” the report to Congress states. Sequestration and longer-term budget cuts could limit capital market confidence in the defense industry. “Faced with this continued uncertainty, companies will be less willing to make internal investments in their defense portfolios or more likely abandon them altogether,” particularly smaller, innovative and niche-product companies with fewer resources to cushion the fiscal pressures, the report states.


Tis is where DOD can play a role. Te report notes that earlier Pentagon decisions to invest in important IB


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