On Jan. 11, the Department of Defense (DOD) released its first-ever National Defense Industrial Strategy (NDIS). The NDIS outlines a multifaceted approach to strengthen U.S. defense capabilities, innovation and global defense leadership through modernizing the defense industrial base (DIB) to handle current and future security challenges. This strategy follows the 2022 National Defense Strategy, which stated DOD would “prioritize coordinated efforts with the full range of domestic and international partners in the defense ecosystem to fortify the DIB, our logistical systems, and relevant global supply chains against subversion, compromise, and theft.” The NDIS provides the strategic vision to coordinate actions and emphasizes four long-term strategic priorities: building resilient supply chains, securing workforce readiness, enabling flexible acquisition and promoting economic deterrence. This memo provides detail and context for these four priorities.
Resilient Supply Chains
The DOD seeks to build supply chains capable of adapting to dynamic national security needs at speed while able to withstand and recover from disruptions. The document notes the DIB faces challenges such as inefficient amounts and capabilities of sub-tier suppliers, a lack of manufacturing capacity and insufficient visibility into critical supply chains. To mitigate these weaknesses and achieve a more resilient supply chain, the NDIS outlines the following actions:
- Incentivize Industry to Improve Resilience by Investing in Extra Capacity: DOD will encourage Congress to build public-private partnerships and incentives to fund and develop spare production capacity to meet demand during crises or unexpected disruptions. The NDIS states DOD will seek to establish risk and technology-sharing mechanisms with private industry while providing oversight authority to ensure successful development and sustainment follow-through.
- Manage Inventory and Stockpile Planning to Decrease Near-Term Risk: Recent geopolitical events have revealed challenges to national stockpiles of strategic supplies, components and technologies. In response, DOD will expand existing and establish new stockpiles of critical resources to meet production requirements for conducting campaigns against adversaries during international conflict or crisis. The NDIS highlights the Joint Production Accelerator Cell as a key to rapidly increase munitions, platforms and materials across DOD and production partners. DOD will also work regularly with ad hoc working groups comprised of leaders and subject matter experts from across DOD, other agencies and industry to ensure utility and evaluate prioritization decisions to expand production and build inventories.
- Continue and Expand Support for Domestic Production: To expand domestic development and production of emerging technologies, the NDIS states DOD will seek opportunities to expand efforts like the Defense Innovation Unity. This will occur as DOD considers longer program durations to accommodate time and cost challenges to defense innovation and post-program support such as follow-up funding and continued mentorship. DOD will also revitalize the organic industrial base (OIB) responsible for the production of items not economical for private enterprise manufacturing and depot-level maintenance systems such as armored ground systems, sea-going ships and aircraft. DOD will work with Congress to fund the full modernization and resourcing of the OIB infrastructure and establish a better understanding of the conditions that cause long-term modernization programs to experience unexpected increases in cost and schedule delays.
- Diversify Supplier Base and Invest in New Production Methods: To mitigate risks associated with overreliance on a limited number of producers and to capitalize on advancements in the commercial sector, DOD will seek to deepen relationships with commercial industries not traditionally involved in defense work. This will broaden the DIB and foster further competition within the defense market.
- Leverage Data Analytics to Improve Sub-Tier Visibility to Identify and Minimize Supply Chain Risks: DOD recognizes that more globalized supply chains require increased visibility to track parts, materials and services to ensure supply chain disruptions are prevented and military readiness is maintained. NDIS states DOD will expand methods to increase supply chain visibility and work collaboratively with defense prime and sub-tier suppliers. DOD also intends to share supply chain risk indicators across the department and interagency when appropriate to further mitigate risks.
- Engage Allies and Partners to Expand Global Defense Production and Supply Chain Resilience: To close material gaps in the DIB, DOD will develop a networked cooperative framework with allies and partners to build production, resilience and interoperability.
- Improve the Foreign Military Sales Process: To improve integrated deterrence, DOD will accelerate the responsiveness of the foreign military sales system with interagency partners to improve capability requirements of allies and partners. These measures include improving DOD’s understanding of allied and partner requirements, accelerating acquisition and contracting support and ensuring broader U.S. government support to improve the foreign military sales process. DOD also intends to reduce production timelines by incorporating ally and partner requirements into acquisition and contracting guidance.
- Enhance Industrial Cybersecurity: The NDIS states DOD will be guided by the DOD DIB Cybersecurity Strategy to build and improve current regulations, policies, requirements, programs and public-private partnerships to counter cyber threats. It favors enhancing current regulations and policies as opposed to developing new ones.
Securing Workforce Readiness
The NDIS states the current labor market lacks sufficiently skilled workers within fields needed to meet domestic production and sustained demand for effective military readiness. To foster workforce development programs, DOD aims to renew interest in industrial jobs while maintaining a sufficiently trained and staffed workforce to achieve national defense objectives. To pursue this, the NDIS identifies the following actions:
- Prepare Workforce for Future Technological Innovation: DOD will invest in upskilling and reskilling programs to ensure the domestic workforce can meet dynamic and technologically advanced manufacturing needs. These investments also include DOD’s Manufacturing Innovation Institutes aimed at connecting organizations to promote activities for affordable and rapid transition and delivery of new and emerging defense-essential technologies.
- Continue Targeting Defense-Critical Skill Sets in Manufacturing and STEM: To target critical skills in manufacturing and STEM, the NDIS highlights the National Imperative for Industrial Skills as an umbrella framework for DOD to partner with industry and government stakeholders and regional communities to meet workforce challenges. DOD will also continue to utilize the Manufacturing USA Network to collaborate beyond major universities and private companies to include community colleges, local nonprofits and state and local governments.
- Increase Access to Apprenticeship and Internship Programs: DOD will continue to prioritize investment in critical skill sets through apprenticeship programs such as the Oak Ridge National Laboratory and the Naval Fleet Readiness Center Southwest Apprenticeship.
- Destigmatize Industrial Careers: To counter negative stigmas associated with industrial work, DOD will collaborate with federal departments and agencies to promote and invest in partnerships with educational institutions to increase awareness for the value of manufacturing and industrial careers.
- Expand Recruitment of Nontraditional Communities: DOD seeks to close gaps of diversity in the workforce with the recently allocated $61.7 million to Historically Black Colleges and Universities and Minority Serving Institutions for the REP HBCU/Mis
Flexible Acquisition
DOD seeks to enable greater flexibility in its acquisition approach and industrial planning to allow for more optimized and dynamic production of capabilities for a stronger supply chain. The NDIS identifies the problem of inappropriate customization that occurs when product acquisition requirements are insufficiently defined. In response, the NDIS states DOD is pursuing the following actions to achieve a more flexible acquisition framework:
- Broaden Platform Standards and Interoperability: The NDIS includes such initiatives as supporting the adoption of open architecture principles, leveraging existing industry standards, incentivizing and educating defense contractors to improve interoperability and exportability. DOD will pursue these actions while working together with allies and partners to address capacity and capability gaps and enhancing production.
- Strengthen Requirements Process to Curb Scope Creep: DOD will focus on the implementation of Instruction 5000.02: Operation of the Adaptive Acquisition Framework to ensure proper engineering analysis is conducted and resource trade-offs are made before programs enter their engineering and manufacturing phases. DOD will also implement advanced virtual development methodologies to help organize development into smaller, more manageable increments with fewer physical prototypes to combat scope creep in projects.
- Prioritize Off-the-Shelf Acquisition: DOD will evaluate how to effectively utilize commercial off-the-shelf procurement from domestic and international markets as cost-effective and innovative solutions to supply chain challenges. This will broaden the DIB and foster more competition while expanding the list of defense contractors.
- Increase Access to Intellectual Property and Data Rights: To mitigate IP-based restrictions on competition, DOD will use a modular open systems approach. This system isolates proprietary technology and prevents overleveraging of private investments from undermining returns on government investments. In conjunction, DOD will negotiate specialized license agreements to better balance DOD and vendor interests and mitigate IP restrictions on proprietary components.
- Consider Greater Use and Policy Reform of Contracting Strategies: To balance flexibility of acquisitions against risks, DOD will seek contract types that enable rapid and iterative delivery of capabilities to ensure contracting authorities align with current priorities.
- Continue to Support Acquisition Reform: DOD will pursue a more aggressive and streamlined acquisition strategy including increasing the use multiyear procurement (MYP). The NDIS states OSD will work with the armed services to identify opportunities to expand and propose MYP opportunities in future budgets.
- Update Industrial Mobilization Authorities and Planning to Ensure Preparedness: DOD will work to set conditions and mobilization requirements to ensure the defense industrial ecosystem is prepared for future crises.
Economic Deterrence
As adversaries such as the People’s Republic of China (PRC) and Russian Federation challenge international fair trade and free markets, DOD has become concerned with adversarial domination of critical markets, specifically regarding the PRC. In response, the NDIS states DOD will advance policies to deter and counter adversaries from weakening U.S. national security through economic means. To achieve this, the NDIS outlines the following actions:
- Strengthen Economic Securities Agreements: DOD will focus on leveraging bilateral and multilateral relationships with allies and partners to reduce reliance on adversarial or unstable nations for critical defense materials.
- Enable International Interoperability Standards Through Active Participation in Standard Setting Bodies: DOD will work with other federal agencies to implement standards and interoperability programs to improve operations between U.S. forces and allies and partners. Through working with international standard-setting bodies, DOD will also boost foreign military sales and opportunities among allies and partners to further support the DIB and national security priorities.
- Fortify Alliances to Share Science and Technology: To retain and nurture technological superiority, DOD will continue to work with other federal agencies and international partners through joint programs and agreements to improve research, development. Test, and evaluation (RDT&E).
- Strengthen Enforcement Against Adversarial Ownership and Protect Against Cyberattacks: DOD will work with key agencies for monitoring potential adversarial ownership and control of U.S. assets such as the International Traffic in Arms Regulations, Export Administration Regulations and the Office of Information Communications Technologies and Services. This will also educate and protect industry against threats posed by foreign capital, adversarial ownership and cyberattacks.
- Strengthen Prohibited Sources Policy: To combat adversarial sourcing within the DIB, DOD will work closely with Congress, allies and partners to enforce more strict policies and identify dependencies to eliminate adversarial influence over the U.S. DIB.
Next Steps
The NDIS is intended to align DOD and congressional efforts to build a defense industrial base capable of achieving U.S. national security objectives and supporting U.S. allies and partners. Specifically, the NDIS calls for DOD and congressional coordination to allocate additional funding for contracts and incentives to build production capacity; fund the full modernization of the OIB infrastructure; pursue contracts with iterative and rapid delivery of capabilities; and build new mechanisms for technology and knowledge exchanges with allies and partners. In the announcement of the NDIS, Assistant Secretary of Defense for Industrial Base Policy Dr. Laura Taylor-Kale emphasized DOD’s commitment to the immediate pursual of these objectives, stating, “we cannot afford to wait. The time for action has come, and we are starting it with this strategy.” Brownstein expects DOD will work with congressional authorizing and appropriating committees to implement several of these objectives through the upcoming FY25 national security legislative cycle.
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