In a March 31 phone-call with Group of Twenty (G20) trade ministers, US Trade Representative Robert Lighthizer stressed that a key lesson of the COVID-19 pandemic is that “over-dependence on other countries [i.e. China] as a source of cheap medical products has created a strategic vulnerability to our economy.” Lighthizer’s point applies to industries beyond medical products, including the US defense industry and other adjacent industries on which the Department of Defense (DoD) increasingly relies.
The current pandemic has highlighted systemic vulnerabilities in the US organic industrial base—both defense and commercial—that have created urgent, cascading, and persistent crises for both DoD and US national security. Indeed, in an April 20 press conference, Ellen Lord, the DoD’s undersecretary for acquisition and sustainment, highlighted supply chain reliance on now closed plants in Mexico and India, noting that “one of the key things we have found out are some international dependencies.” More fundamentally, the virus’s spread has also underscored the lack of a synchronized, coordinated US national strategy for managing even slow-moving, non-traditional security disruptions.
A layered and targeted response is required to meet the proximate challenges to the defense and dual-use supply chain, which is critical to national security. This crisis, as terrible as it is, may be the catalyst for taking steps today that are necessary to build the supply chain resilience and industry agility required to meet future national crises.
Over the last six weeks, the US and global defense industry have experienced a variety of COVID-19-related challenges. Defense companies have implemented measures to safeguard the health of both their business—laying off workers, reducing salaries, suspending dividends—and their employees. Throughout the supply chain and life cycles of the material development process, companies have temporarily shut down or greatly reduced activities at plants in order to lessen employee exposure to the coronavirus.
Small businesses that lack the financial resources to withstand prolonged production disturbances are particularly vulnerable. In a recent US National Defense Industrial Association survey of more than 450 small businesses, sixty-two percent responded that they have experienced coronavirus-related disruption to cashflow. These results animate one of the key findings of the September 2018 assessment of the defense industrial base launched by Executive Order 13806: “macro forces have led to impacts primarily in the sub-tiers of the defense supply chain.”
Of particular risk to the DoD is the finding from a recent report from Govini that many of these vulnerable small businesses are part of DoD efforts to develop technologies that sit at the seam between the traditional defense industry and commercial high-tech sector, such as artificial intelligence and unmanned systems. These technologies—and the capabilities they enable—are reshaping military requirements and military-technological competition with China and Russia.
DoD efforts to address associated modernization and delivery risks have emphasized ensuring industry liquidity, offering certainty about—and in some cases speeding up—procurements, and attempting to clarify DoD’s expectations of industry. Cash, confidence, and clarity are all necessary to abate the pressing effects of COVID-19. However, they are insufficient to address enduring industry and supply chain vulnerabilities exposed by the pandemic, especially when viewed through the prism of US-China competition and the growing DoD reliance on dual-use technologies.
More work needs to be done to fully understand the scope of this vulnerability, particularly to competitors such as China. Even if the temptation towards isolation should be generally resisted, a thorough evaluation of supply-chain vulnerability will likely lead DoD and the broader national security community to rightly expand the list of items considered to be “re-shored” in a post-COVID-19 world. Deeper defense industry engagement with allies and partners will help build supply chain resilience, help maintain competitiveness of the US defense industry in emerging export markets, and meet the challenge from the United States’ geopolitical competitors.
The coronavirus pandemic has also exposed a more foundational vulnerability. The United States was unprepared to deal with both the continuing public health consequences of the pandemic and its knock-on effects. The results have been slow delivery of critical equipment, material damage to the US economy and critical institutions, and, more importantly, the erosion of US global leadership and credibility.
Several measures will be crucial to better position the United States to better cope with future crises and, especially, bio-related threats.
First and foremost, DoD should use the stability of a prioritized government market to attract trusted capital from the private sector to build momentum for commercial companies to invest in research, development, and manufacturing for capability areas critical to the US defense industrial base. Public-private partnerships can keep warm a critical industrial capability that can be scaled in times of crisis.
More broadly, the DoD and the US government should consider establishing a model to establish and fund contracts similar to the US Transportation Command’s civilian reserve air-fleet (CRAF) for augmentation in time of national emergency and capability shortfalls. An example would be to have contracts with industry in areas such as additive manufacturing with the ability to scale.
Similarly, funded national prototyping integration facilities that can quickly build and modify equipment for specific purposes could offer enhanced agility to meet supply chain stresses. Funding should be allocated in the budget, much like a Federally Funded Research and Development Center or National Lab, for production of unique and critical components, like microelectronics.
In addition, the US national security community should re-evaluate its overall priorities. The National Security Strategy included several paragraphs on biothreats “whether as the result of deliberate attack, accident, or a natural outbreak.” And while there is a definite risk of a “fighting the last war” overcorrection, the need to establish a more robust biothreat detection and response capability is evident and enduring.
As part of this effort, DoD and US government stakeholders should work to establish a national biotechnology center in line with the June 2019 Presidential Executive Order that prioritized biotech development and facilitates a coordinated and synchronized US government response. Currently, many disparate organizations are involved in a fragmented response. This entity will bridge the policy execution gap and help the Department of Homeland Security and all other appropriate government and non-government biotech and biomedical agencies devise and implement appropriate crisis responses.
Implementing these measures will require a reallocation of funding and a new mindset within DoD. The critical tasks of deterring and dissuading US competitors will remain central to the DoD mission, but COVID-19 should serve as a catalyst to broaden the aperture and more fully account for the changing nature of DoD requirements. The United States cannot afford to let this tragedy and ongoing crisis go to waste.