The US National Defense Industrial Strategy: No Shortage of Ambition

The publication, just before Christmas, of the first ever explicit US National Defense Industrial Strategy (NDIS) was little covered in European media, despite its potential significance for the US’s allies and friends.

Given that the US has long had laws, procedures and practices that ensure that it knowingly imports few defence systems from outside its territory, it is perhaps surprising that such a document was thought to be needed. However, Russia, China and other hostile entities are presenting novel problems for the US. China is seen as the ‘pacing challenge’ – that is, as technologically a bigger threat than Russia.

The strategy document is multi-dimensional, pointing to four directions of effort: the building of resilient supply chains; reinforcing workforce readiness; adopting flexible acquisition practices; and strengthening economic deterrence. Within these four areas are numerous specified sub-fields. Thus, ‘Actions to Achieve Resilient Supply Chains’ specifies eight areas of activity and change. Workforce Readiness involves five such areas, generating Flexible Acquisition requires seven and Economic Deterrence five. Many of these sub-fields contain multiple issues and tasks within them such that, overall, if pursued, the US NDIS will require a major and sustained change programme to be implemented. A classified implementation plan – which must tackle securing buy-in for the ambitions of the Department of Defense (DoD), both from other parts of the US government and from the country’s friends and allies – is said to be in preparation. Experience in many large organisations suggests that change management programmes involving dozens of lines of effort over multiple years tend to lose momentum.

Directions Within the US

Under the heading of Resilient Supply Chains, the NDIS underlines a continuing commitment to increasing US productive capacity for conventional munitions, a reflection of experience with Ukraine and concern about what future conventional war could entail. Unlike in the UK, in the US, most artillery munitions are produced in government-owned and often government-operated facilities, collectively known as the ‘organic industrial base’. These entities are under less pressure than private firms to be efficient in a conventional sense, and the US Army has made clear its plans to expand production capacity over the next five years or more, especially for 155 mm shells, initially to meet Ukrainian needs. (Equivalent UK plants are in the hands of BAE Systems, and the government committed to expansion of some of those industrial capabilities with contracts last September.)

The US is also looking to incentivise expanded production capacity across its defence enterprise. The NDIS states that ‘The DoD will seek to establish risk-sharing mechanisms and technology-sharing structures to jointly fund, develop, and secure spare production capacity’. Inducing private sector businesses to spend their own money for contingencies will not be straightforward, and the paper accepts that the Pentagon will need permission from Congress to use more multi-year contracts to promote corporate investment. The demand signal to stimulate surplus capacity will need to be loud and clear. Currently, the norm even for performance-based logistics contracts – the US equivalent of the UK’s availability contracts – is for one-year terms, albeit with possibilities for annual extensions. In contrast, availability contracts in the UK are multi-year.

Among the NDIS concerns is the limited US awareness of elements coming into US supply chains from adversarial states. Among the paper’s many recommendations is that controls on internal investments and the use of materials and parts from adversarial states should be strengthened.

Strikingly, the strategy recognises the potential value of using contracts specifically to protect the defence industrial base. The Pentagon appears ready to buy things not immediately needed by the US military. Exports of such goods would obviously have considerable appeal.

All this signals the need for change in the US, as does the difficult matter of the ambition shown in the NDIS for the US government to secure much better access to the intellectual property (IP) that is at the heart of many defence systems, and which is currently controlled by the private sector. The US government is looking to special licensing agreements and a more modular approach: the form, fit and function of sub-systems should be available to enable others to develop alternative elements. In a commitment that will add more work to capability planning and contracting processes, the DIS states that ‘the DoD will integrate IP planning fully into acquisition strategies and product support strategies to protect core DoD interests over the entire lifecycle’. This is a difficult area because of the entanglement of IP funded by the government with the background IP that a company needs to possess in order to undertake work successfully.

External Messages

With regard to friends and allies, frequently mentioned in the document, the NDIS argues for greater US exploitation of technology developed elsewhere, not least from AUKUS partners and Japan. But it also emphasises that the export possibilities of new US systems should be an explicit concern in requirements-setting processes. The authors of the strategy are clearly hoping for increased exports, and the paper refers to making foreign military sales processes easier to use. Thus, the paper can be viewed as both a danger and an opportunity for European and other foreign companies. It does not address the established concern in Europe that, once a sensitive technology is transferred to the US, it tends to fall under the comprehensive control of US authorities.

Whereas much discourse about expanded defence industrial capacity emphasises protracted warfighting, the NDIS stresses the importance of stocks and industrial capacity for deterrence and assurance functions: ‘The United States and its allies and partners require modernized defense industrial capacity that strengthens national defense, and that reassures and supports those countries in the direct path of adversarial influence and aggression’.

The implicit reasoning is that the existence of such industrial assets would reduce any expectations of a quick and inexpensive victory on the part of an adversary contemplating aggression.

Conclusion

There could be a question about the overall coherence of the NDIS. For instance, the specified wish to bring new and smaller suppliers into the defence business points to the need to make it easier for these suppliers to deal with the cyber protection regime of the DoD. But as highlighted elsewhere in the document, the need to protect US technology from hostile eyes asserts the requirement for tight cyber security systems.

From an external analyst’s perspective, the paper is light on references for the claims it makes and contains few illustrations of how its suggestions have worked in the past. While the lack of what academics would call a firm evidence base might be explained in part by the need for brevity, and perhaps some concern over classified matters, it does weaken the intellectual impact of the arguments.

Only time will show the extent to which the proposals of the 2023 NDIS are implemented. The strategy represents, in practice if not in name, yet another effort in a longstanding series of endeavours to improve US defence acquisition. With a US election due in the autumn, the document’s shelf life could be very limited. But even in the event of another Democrat administration, making sure that its ideas are embraced by Congress and embedded in the procurement strategies and choices of the US armed services and the DoD as a whole will require dedicated and sustained effort.

The views expressed in this Commentary are the author’s, and do not represent those of RUSI or any other institution.

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