Should Pentagon Adopt An Industrial Policy?

September 24, 2013 defense-aerospace.com

(Source: Lexington Institute; issued September 23, 2013)

Time to Add A Pinch of Industrial Policy to the Defense Department’s Recipe for Acquisition

Through good times and bad, one near-constant in the Department of Defense (DoD) is its refusal to consider an explicit industrial policy. On occasion, the Pentagon’s leadership will make a rather hesitant foray into the world of industrial planning and policy as in the 1990s when there was an attempt to make performance-based logistics common practice in sustainment contracting or in 2009-2010 when insourcing was prescribed as the solution to rising O&M costs. The only concrete example of industrial policy in recent memory was the so-called “Last Supper,” when then-Secretary of Defense Les Aspin told the assembled titans of industry that with the fall of the Soviet Union and planned decreases in defense spending there would not be enough money for all of them to survive. Consequently, Aspin announced, they needed to merge.

It is long past time for DoD to get serious about its industrial policy and to tie the maintenance of critical parts of the aerospace and defense industrial base to its acquisition policies and programs. The leadership of U.S. companies, regardless of sector but particularly in the defense space, are neither suicidal nor stupid. It does no good for the Pentagon to urge private companies to be more innovative and spend more of their own resources on R&D for products that the military will not have the money to procure. DoD needs to realize that they will have to take concrete steps to maintain a viable, modern and responsive defense industrial base.

Rather than the Pentagon jumping into the deep end of industrial policy, what about taking a baby step? This would be like adding a little salt or pepper to the old family recipe just to spice it a bit. I am thinking specifically about maintaining the C-17 production line which is due to close in the next few years absent major foreign contracts.

The end of C-17 production means that this nation will not be producing a large body military aircraft for the first time in some 70 years. Another large body, purpose-built military aircraft will not come along until such time as the Air Force begins acquiring its new strategic bomber. DoD should seriously consider buying a minimum sustaining number of these aircraft to replace older models. Because these airframes still have life left in them, they could be sold internationally.