Page 1 GAO-10-317R 

United States Government Accountability Office

Washington, DC 20548 

January 27, 2010 

The Honorable Sherrod Brown 

Chairman 

Subcommittee on Economic Policy 

Committee on Banking, Housing, and Urban Affairs 

United States Senate 

The Honorable Evan Bayh 

Chairman 

Subcommittee on Security and International Trade and Finance 

Committee on Banking, Housing, and Urban Affairs 

United States Senate 

Subject: DOD Assessments of Supplier-Base Availability for Future Defense Needs

The Department of Defense (DOD) relies on thousands of suppliers to ensure it has 

the weapons and supporting equipment needed to meet U.S. national security 

objectives. Congress has provided DOD with a variety of authorities to allow it to 

maintain information on its suppliers and to take actions to ensure that its suppliers 

can deliver needed items. In October 2008, we reported on our assessment of DOD’s 

efforts to monitor the health of its supplier base and identify and address gaps and 

recommended that DOD develop a departmentwide framework and consistent 

approach, which DOD has begun to implement.1 In light of increased globalization in 

the defense industry and consolidation of the defense supplier base into a few prime 

contractors, you requested that we review DOD’s efforts to assess supplier-base 

availability for future defense needs. On October 27, 2009, we briefed your staff on 

the results of our work. This report transmits that briefing (see enclosure). 

To evaluate DOD’s efforts, we reviewed documents related to supplier-base issues 

and interviewed a variety of U.S. government officials, including representatives of 

the Air Force, Army, Navy, Missile Defense Agency, Office of the Secretary of 

Defense, and Department of Commerce’s Bureau of Industry and Security, Office of 

Technology Evaluation. We also spoke with representatives of the Aerospace 

Industries Association and the National Research Council, which recently released 

reports on defense supplier-base concerns. We conducted this performance audit 

from January 2009 through October 2009 in accordance with generally accepted 

 

1 GAO, Department of Defense: A Departmentwide Framework to Identify and Report Gaps in the 

Defense Supplier Base Is Needed, GAO-09-5 (Washington, D.C.: Oct. 7, 2008). 
government auditing standards. These standards require that we plan and perform 

the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe that the 

evidence obtained provides a reasonable basis for our findings and conclusions based 

on our audit objectives. 

Summary

Both DOD and Commerce conduct assessments of supplier-base availability for 

defense needs that generally focus on the next 5 years. Several offices within DOD 

and Commerce’s Office of Technology Evaluation have a role in assessing supplierbase availability, primarily conducting short-term assessments of selected sectors2

 or 

existing weapon programs. In 2004, DOD’s Office of Industrial Policy conducted a 

one-time series of comprehensive DOD-wide assessments of supplier-base availability 

that forecasted 10-20 years into the future. According to DOD and Commerce 

officials, assessments of future supplier-base availability for defense needs beyond a 

5-year time frame can have limitations, in part, because it can be difficult to predict 

technologies and whether investment in the supplier base will be needed to support 

these technologies. Recently, the National Research Council and an industry 

association recommended that DOD continually assess the supplier base from a more 

strategic perspective to include its availability for long-term defense needs. DOD has 

not acted on these recommendations; however, DOD plans to incorporate industrialbase considerations into its 2010 Quadrennial Defense Review to raise awareness of 

long-term, future, supplier-base availability for defense needs. 

Agency Comments 

We provided a draft of this report to DOD and Commerce. DOD reviewed the draft 

report and had no comments. Commerce concurred with our findings and provided 

technical comments, which we have incorporated. 

As arranged with your offices, unless you publicly announce the contents of this 

report earlier, we plan no further distribution of it until 30 days from the date of this 

letter. At that time, we will send copies of this report to appropriate congressional 

committees; the Secretaries of Defense and Commerce, as well as other interested 

parties. In addition, the report will be available at no charge on the GAO Web site at 

http://www.gao.gov. Contact points for our Offices of Congressional Relations and 

Public Affairs may be found on the last page of this report. 

 

2

DOD categorizes its supplier base into seven sectors: aircraft; command, control, communication, computers, 

and intelligence; ground vehicles; missiles; services; shipbuilding; and space. 

Page 2 GAO-10-317R 
If you have questions or need additional information, please contact me at (202) 512-

4841 or martinb@gao.gov. Key contributors to this report were John Neumann, 

Assistant Director; Lisa Gardner; Josie Sigl; Sylvia Schatz; and Art James. 

Belva M. Martin 

Acting Director 

Acquisition and Sourcing Management 

Enclosure 

Page 3 GAO-10-317R 
Enclosure 

Page 4 GAO-10-317R 

1

DOD Assessments of 

Supplier-Base Availability for 

Future Defense Needs

Briefing to the Senate Committee on Banking, 

Housing, and Urban Affairs, Subcommittee on 

Security and International Trade and Finance

October 27, 2009
Enclosure 

Page 5 GAO-10-317R 

2

Introduction

• The Department of Defense (DOD) relies on thousands of 

suppliers to provide weapons, equipment, and raw materials 

to meet U.S. national security objectives. Yet, increased 

globalization in the defense industry and consolidation of the 

defense supplier base into a few prime contractors has 

reduced competition and single-source suppliers have 

become more common for components and subsystems.

• In response to your interest in DOD’s ability to maintain U.S. 

defense manufacturing capabilities, we determined how 

DOD assesses supplier-base availability for future defense 

needs.
Enclosure 

Page 6 GAO-10-317R 

3

Scope of Work

Obtained documentation and interviewed officials to determine how DOD 

assesses supplier-base availability. We did not evaluate any of the prior 

assessments. Offices contacted included:

• Air Force

• Secretary of the Air Force, Acquisitions, Arlington, Virginia 

• Air Force Research Lab, Dayton, Ohio

• Army Acquisitions, Logistics, and Technology Office, Washington, D.C.

• Office of Naval Research, Technology Warning Division, Washington, D.C.

• Missile Defense Agency, Arlington, Virginia

• Deputy Under Secretary of Defense for Industrial Policy, Washington, D.C.

• Director, Defense Research and Engineering, Washington, D.C.

• Department of Commerce

• Bureau of Industry and Security’s Office of Technology Evaluation, Washington, D.C. 
Enclosure 

Page 7 GAO-10-317R 

4

Scope of Work (cont.)

• We also interviewed officials from the National Research Council, Washington, D.C., 

and the Aerospace Industries Association, Arlington, VA, to discuss their recent 

reports highlighting the need for DOD to assess future technology and supplier-base 

availability.

• We found, during our review of DOD assessments and discussions with DOD 

officials, that DOD generally defines short-term forecasts as up to 5 years in the 

future and long-term forecasts as 10-20 years into the future. For the purposes of 

this briefing we used these definitions.

• We conducted this performance audit from January 2009 through October 2009 in 

accordance with generally accepted government auditing standards. Those 

standards require that we plan and perform the audit to obtain sufficient, appropriate 

evidence to provide a reasonable basis for our findings and conclusions based on 

our audit objectives. We believe that the evidence obtained provides a reasonable 

basis for our findings and conclusions based on our audit objectives.
Enclosure 

Page 8 GAO-10-317R 

5

Summary

• In general, DOD and Commerce assess supplier-base availability for 

defense needs with a focus on the next 5 years. 

• In 2004 and 2005, DOD conducted a one-time series of DOD-wide 

assessments of supplier-base availability for long-term defense needs.

• According to DOD and Commerce officials, assessments beyond 5 years 

are not sufficiently reliable to accurately project supplier-base availability. 

• The National Research Council and an industry association recently 

recommended that DOD continually assess the supplier base from a 

more strategic perspective to include its availability for long-term 

defense needs. 

• DOD plans to include the Office of Industrial Policy in its Quadrennial 

Defense Review process for fiscal year 2010 to raise awareness of longterm, future, supplier-base availability for defense needs.
Enclosure 

Page 9 GAO-10-317R 

6

Background

• DOD has a variety of authorities available to maintain information on its 

suppliers within the U.S. industrial base as well as to ensure a domestic 

capability for certain items.

• Defense Production Act of 1950, as amended: Title VII provides for investigative authority to collect information on the U.S. industrial base.

• Title 10, U.S. Code: Sections 2501 through 2506 relate to the national technology and industrial base and include a requirement that DOD provide the House and Senate Armed Services Committees with 

annual industrial capability assessments.

• Several DOD Directives and a National Security Space Acquisition Policy direct program officials to complete Industrial Capability Assessments before weapon systems can move from the design to development 

acquisition phase and from the development to production phase.
Enclosure 

Page 10 GAO-10-317R 

7

GAO Highlighted the Need for Improved Visibility 

to Oversee the Defense Supplier Base

• In Oct. 2008, GAO assessed DOD’s efforts to monitor the health of its 

supplier base and identify and address gaps and found that DOD’s efforts 

lacked a departmentwide framework and consistent approach.1 DOD’s 

efforts generally responded to individual program supplier-base concerns 

or were broader assessments of selected sectors. GAO recommended that 

DOD

• leverage existing DOD efforts to identify criteria for supplier-base 

problems and use them to guide the identification and monitoring of 

supplier-base concerns throughout DOD, and

• create and disseminate DOD-wide written requirements for reporting 

potential concerns about supplier-base gaps. 

• In June 2009, DOD updated its “Defense Acquisition Guidebook” to include 

criteria to identify critical supplier-base issues and establish a reporting 

structure for program managers to elevate supplier-base concerns.

1 GAO, A Department wide Framework to Identify and Report Gaps in the Defense Supplier Base is Needed, GAO-09-5 (Washington, 

D.C.: Oct. 7, 2008).
Enclosure 

Page 11 GAO-10-317R 

8

DOD and Commerce Generally Conduct ShortTerm Supplier-Base Assessments 

• In general, DOD and Commerce assess supplier-base availability for 

defense needs with a focus on the next 5 years. 

• Several offices within DOD have a role in assessing either defense 

capabilities or supplier base needs:

• Industrial Policy

• Defense Research and Engineering

• Military services industrial base planners

• Other DOD components, such as Missile Defense Agency industrial base planners

• In addition, the Commerce Department conducts defense supplier-base assessments at DOD’s request.
Enclosure 

Page 12 GAO-10-317R 

9

DOD and Commerce Assessments

DOD-wide short-term, supplier-base 

program and sector assessments with 

some long-term, sector-specific 

assessments.

Addresses supplier-base gaps 

when an issue spans more than one 

military service or DOD component. 

DOD–Industrial Policy

Primarily short-term, but can perform 

long-term assessments if requested by 

DOD.

Conducts supplier-base 

assessments for selected sectors or 

technology areas at DOD’s request.

Commerce–Office of Technology 

Evaluation

Primarily long-term defense technology 

needs. In general these needs are not 

matched with supplier-base availability.

Focuses on identifying and 

advancing future technologies to 

support warfighter mission. 

DOD–DDR&E and ManTech

Primarily short-term with some long-term 

assessments of military service program 

or sector needs.

Assesses supplier-base issues for 

existing weapon programs or 

sectors. 

DOD–Military Services and Missile 

Defense Agency

Type of Scope of assessments

assessment

Agency or DOD 

component

Source: GAO
Enclosure 

Page 13 GAO-10-317R 

10

Assessments: Industrial Policy

• Industrial Policy is DOD’s primary representative for supplier-base issues. Its 

mission is to sustain an environment that ensures DOD’s supplier-base is reliable, 

cost-effective, and sufficient. 

• Routinely identifies and works to mitigate short-term supplier-base gaps when 

these gaps span multiple DOD components. 

• Industrial Policy’s Annual Industrial Capabilities report provides a broad 

analysis of supplier trends, and summarizes DOD components’ studies of 

short-term supplier-base concerns. 

• Periodically performs long-term supplier-base assessments, for example:

• Updated Vertical Lift Study (June 2009 ) 

• Solid Rocket Motors Industrial Capabilities (June 2009)

• Infrastructure Rationalization in the U.S. Naval Ship Industrial Base 

(January 2009)

• Steel and Specialty Metals Trend Analysis (December 2008)
Enclosure 

Page 14 GAO-10-317R 

11

Assessments: Director, Defense Research and 

Engineering (DDR&E)

• DDR&E is DOD’s primary representative for identifying and advancing future 

technologies to support the warfighter mission. 

• DDR&E focuses on identifying long-term defense needs and associated technology 

to determine investment areas for its technology portfolio. Its efforts include: 

• “horizon scanning” assessments to determine the direction of future technology, 

as well as identifying capabilities acquired by adversaries and determining 

mitigation strategies, 

• a forecasting experiment with academia and industry called the X2 project that 

seeks to identify future “disruptive” technologies, such as radar, satellites, and 

antisatellite technologies, and

• targeting companies that typically do not work with the government through its 

Open Business Cell project to foster future collaboration.

• According to DDR&E officials, its efforts to identify long-term defense needs and 

associated technology generally do not include forecasting long-term supplier-base 

availability to meet these needs.
Enclosure 

Page 15 GAO-10-317R 

12

Assessments: Air Force 

• The Air Force generally assesses supplier-base issues for existing weapon programs as needed to address supplier gaps. For example: 

• Infrared Focal Plane Array Substrate Industrial Base Assessment 

(Aug. 2008): Validated current DOD efforts to develop a domestic source and to continue funding research for next-generation materials and technologies to 

address two concerns: (1) domestic manufacturers of certain infrared focal 

plane arrays depend on a foreign supplier with increased delivery lead times, 

and (2) next-generation materials and technologies are not anticipated to be 

available for military applications for decades. 

• Solid Rocket Motor Industrial Base Assessment (Aug. 2008): Evaluated 

potential risks to domestic manufacturing capabilities associated with 

consolidation and declining demand that could jeopardize the industry’s ability to maintain the necessary skill set for casting motors. The report called for 

further monitoring and for adopting alternative technologies, materials, and 

qualification methods.

• Air Force officials—responsible for planning and executing the science and technology program—stated that their supplier-base assessments generally focus 

on improving the manufacturing process for current programs and platforms for the 

short term. 
Enclosure 

Page 16 GAO-10-317R 

13

Assessments: Army

• The Army generally assesses supplier-base issues for existing weapon programs as 

needed to address supplier gaps. Recent examples include:

• Army Communications Sector Assessment (Nov. 2008): The Army 

examined the capability of the Transmission and Communications Sector 

industrial base to develop, manufacture, and support legacy and future weapon 

systems. The study concluded that the supplier-base is fiscally healthy. 

• Power Sources and Products Sector Assessment (Nov. 2008): The Army 

found the supplier-base supporting this sector to be fiscally healthy, but 

suggested further monitoring of power source and products supplier-base 

issues. 

• The Army Acquisition, Logistics, and Technology Office—whose mission is to 

acquire and develop technology to meet the Army’s current and future service 

requirements—primarily focuses on improving current and short-term manufacturing 

processes for existing technologies. 
Enclosure 

Page 17 GAO-10-317R 

14

Assessments: Navy

• The Navy generally assesses supplier-base issues for existing weapon 

programs and as needed to address supplier gaps. For example:

• Advanced Anti-Radiation Guided Missile Assessment 

(Aug. 2008): Provided a baseline of industrial capabilities, financial 

stability, and risks, as well as identified potential alternate suppliers for 

the critical contractors for the program. Concluded that all 10 of the 

program’s contractors were considered to be a ‘moderate’ industrial 

risk and six were a ‘moderate’ financial risk. Recommended that 

companies rated as moderate financial risk be monitored every 6 to 

12 months.
Enclosure 

Page 18 GAO-10-317R 

15

Assessments: Missile Defense Agency 

(MDA)

• According to MDA officials, priority is given to supplier-base assessments 

for items that are in danger of diminishing or vanishing rather than 

hypothetical future industrial base needs. Examples include:

• Infrared Sensor Assessment (Feb. 2008): Identified sole/single 

sources, foreign sources/dependencies, business, and financial risks 

at infrared sensor developers and component manufacturers. 

Recommended assessing an alternative source for certain materials 

that are critical to the production of infrared sensors—including 

consideration of developing a domestic supplier. 

• Divert and Attitude Control System (DACS) Industrial Capability 

Assessment (Sept. 2008): Recommended monitoring the financial 

viability of the prime contractor—the only suitable source—and 

monitoring the production of high-temperature DACS nozzle material 

as it requires an expensive, difficult-to-process material only available 

from Kazakhstan.
Enclosure 

Page 19 GAO-10-317R 

16

Assessments: Commerce’s Office of 

Technology Evaluation

• Commerce’s Office of Technology Evaluation regularly conducts supplierbase assessments, typically when requested by an agency, to address 

concerns about meeting short-term technology or production needs. For 

example, it has conducted numerous supplier-base studies for DOD of 

defense-related industries and technologies.

• Recent assessments include:

• Defense Industrial Base Assessment—Counterfeit Electronics 

(Jan. 2010)

• Technology Assessment of 5-Axis Machine Tools (July 2009)

• Domestic Industrial Base Capabilities for Defense Mission-Critical 

Microchips (May 2009)

• Defense Industrial Base Assessment of the U.S. Space Industry (Aug. 2007)

• Technology Assessment of Certain Aromatic Polyimides (July 2007)

• Although Commerce officials stated they have not conducted long-term 

assessments on the supplier base, they can do so at DOD’s request.
Enclosure 

Page 20 GAO-10-317R 

17

DOD Conducted a Series of Special Assessments 

of Future Supplier-Base Availability

• In 2004 and 2005, Industrial Policy issued five comprehensive DOD-wide 

assessments of critical technologies and industrial capabilities needed in 

the 21st century in five concept areas: (1) Battlespace Awareness, 

(2) Command and Control, (3) Focused Logistics, (4) Force Applications, 

and (5) Protection.

• The reports noted technology areas where DOD needed to obtain or

sustain an industrial capability and made recommendations to DOD

components. According to Industrial Policy officials, they did not 

monitor the implementation of the recommendations and, therefore, do 

not know whether they were implemented.

• According to Industrial Policy officials, these reports were the first and 

only comprehensive DOD-wide assessments conducted to assess 

supplier-base availability for long-term defense needs across all major 

sectors.
Enclosure 

Page 21 GAO-10-317R 

18

Capability Assessments That Look Past 5 

Years May Not Be Reliable

• According to DOD and Commerce officials, supplier-base assessments 

that look beyond 5 years may not be reliable predictors of future needs. 

According to these officials, it is difficult to predict the technologies that will 

be available to DOD and if it will need to invest in the supplier base to 

support the technology. 

• DOD officials cited two examples of efforts to assess future supplier base 

needs that were unsuccessful:

• DOD was unsuccessful in establishing a domestic supplier base for 

liquid crystal displays after investing millions of dollars, in part because 

this technology was developed more rapidly by other sources.

• A 1992 Army study that looked 30 years into the future for Army 

technology failed to predict certain infrastructure advances. However, 

a 2008 DOD assessment of the study concluded that this was too far 

into the future to have reliable predictions especially for some rapidly 

moving technologies. The 2008 assessment suggested that the period 

between studies not exceed 10 years. 
Enclosure 

Page 22 GAO-10-317R 

19

Two Groups Highlight Need for DOD to Assess 

Future Technology and Supplier-Base Availability

• The Aerospace Industries Association and a committee formed by the National 

Research Council have raised concerns on future availability of the supplier base for 

defense needs.

• In July 2009, the Aerospace Industries Association (AIA) released a study 

discussing the current gap between DOD’s defense strategies and the supplierbase capability. The study recommendations included:

• DOD continually assess the supplier base from a more strategic 

perspective instead of relying on prime contractors to identify and address 

potential loss of critical capabilities on a program-by-program basis, and 

• Congress reinvigorate its oversight/review of defense supplier-base issues 

to see how well DOD is meeting the goals set out in Section 2501 of Title 

10, U.S. Code.

• According to AIA officials, they have spoken with the Under Secretary of 

Defense for AT&L, the Director of Industrial Policy, and the Deputy Under 

Secretary for Policy to seek ways to address the recommendations. According 

to Industrial Policy officials, they are reviewing the report and assessing what 

actions, if any, they would take in response to these recommendations.
Enclosure 

Page 23 GAO-10-317R 

20

Two Groups Highlight Need for DOD to Assess 

Future Technology and Supplier-Base Availability 

(cont.)

• In 2006, the National Research Council’s Critical Technology Accessibility 

Committee report made recommendations to DOD, including that the

• Under Secretary of Defense for AT&L in collaboration with the Defense 

Intelligence Agency, develop a system for monitoring the risks of 

component unavailability and regularly assess their vulnerabilities and 

recommend mitigation action, and

• Under Secretary of Defense for AT&L, in collaboration with the 

Defense Intelligence Agency, develop a system for monitoring U.S. 

industrial health in strategically important global commercial market 

sectors that are critical to the availability of components for DOD.

• According to the Committee Chair, DOD has not acted on the report 

recommendations. Industrial Policy officials noted that actions on these 

recommendations would require higher-level DOD consideration as 

multiple offices of DOD would be involved.
Enclosure 

Page 24 GAO-10-317R 

21

Recent DOD Initiative to Incorporate Long-Term 

View of Supplier Base into Its Annual Review 

Process

• According to an official from the Office of Industrial Policy, the Deputy 

Secretary of Defense requested that the Under Secretary of Defense 

for Acquisition, Technology, and Logistics incorporate industrial-base 

considerations into DOD's fiscal year 2010 Quadrennial Defense 

Review. As a result, the Office of Industrial Policy has been fully 

participating in this review. 

• Industrial Policy is also working closely with the Office of the Under 

Secretary of Defense for Policy to ensure that the final report of the 

Quadrennial Defense Review includes a section on industrial-base 

issues. 

• The House Armed Services Committee report, H.R. 111-166—for the 

National Defense Authorization Act for Fiscal Year 2010—directed that 

a National Defense Panel be formed to review the Quadrennial 

Defense Review's effectiveness, which according to the Committee

Chairman would include an elevation of the industrial-base issues in 

this process. 

(120857) 
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