Solid Rocket Motors: DOD and Industry Are Addressing Challenges to Minimize Supply Concerns
Released: 2017-10-26T00:00:00


Highlights: section_title: Why GAO Did This Study
paragraphs: DOD relies on a multi-tiered supply chain to provide SRMs, the propulsion systems behind the various missile systems that provide defense capabilities to meet U.S. national security objectives. The SRM industrial base includes manufacturers that turn to an extensive network of suppliers that provide the raw materials, components, and subsystems needed to build SRMs. DOD is responsible for developing a strategy for the national industrial base that ensures that defense contractors and their suppliers are capable of providing the goods and services needed to achieve national security objectives.

GAO was asked to review the state of the U.S. industrial base for SRMs. This report addresses (1) SRM industry trends, (2) single source supplier risks, and (3) opportunities for SRM manufacturers' engineering workforce development. GAO analyzed DOD's annual industrial capabilities reports to Congress for fiscal years 2009 through 2016, which reflect DOD's most current information on SRM risks, and reviewed DOD budget data and information from missile prime contractors and SRM manufacturers. GAO also interviewed missile prime contractors, SRM manufacturer representatives, and officials from DOD and the military departments.

section_title: What GAO Found
paragraphs: Over the past two decades, the solid rocket motor (SRM) industrial base has undergone various changes including consolidation and recent expansion. Specifically, since 1995, the industry has consolidated from six U.S. manufacturers to two U.S. manufacturers. With regard to expansion, a foreign supplier entered the market in 2012, and in 2017, a U.S. firm, which is ultimately foreign-owned, was also established. According to the Department of Defense (DOD) while it supports competition, its current demand for SRMs can only sustain two manufacturers. Although at this stage it is too early to know how, or if, these new entrants will impact the economic viability of the more long-standing U.S. manufacturers.

The consolidation in the SRM industrial base has also been accompanied by a decrease of suppliers throughout the supply chain. For example, one SRM manufacturer estimated a decrease in suppliers, from approximately 5,000 to 1,000, over the last 20 years. This increases the risk of production delays and disruptions in the event that key components and materials available from a single source become unavailable from that source. GAO found that DOD and industry are taking steps to identify and mitigate these risks, such as by establishing alternative sources and requiring advance notice when suppliers are considering exiting the market.

In its annual industrial capabilities reports to Congress, DOD has consistently stated that the limited number of new missile development programs inhibits its ability to provide opportunities to help SRM manufacturers maintain their workforce capabilities. Specifically, with few new missile programs being initiated, engineers have had fewer opportunities to develop their engineering skills related to SRM concept designs, system development, and production, which are critical if SRM performance issues arise. However, in 2016, DOD funded a 4-year project to enhance engineering design skills for less experienced engineers working for the two U.S. manufacturers and help them develop advanced SRM technologies.

section_title: What GAO Recommends
paragraphs: GAO is not making recommendations at this time.

section_title: Letter
paragraphs: The Department of Defense (DOD) relies on multiple types of missiles— including tactical missiles used for short distances, longer-range strategic  missiles, and missile defense systems to intercept enemy missiles—to  provide essential defense capabilities. Many of these missiles are  powered by solid rocket motor (SRM) propulsion systems, which provide  the thrust the missiles need to reach their intended targets. DOD acquires  missiles from prime contractors, which in turn contract with other  manufacturers to acquire SRMs. Over the past two decades, the number  of U.S. companies that manufacture SRMs has consolidated to two  manufacturers. These manufacturers rely on a network of suppliers,  which have also experienced consolidation, to obtain the raw materials,  components and parts needed for the SRM. The consolidation of the  supplier base at various levels in the supply chain and decreased  demand for SRM materials has reduced competition, and single source  suppliers have become more common throughout the supplier network.

Within DOD, the Manufacturing and Industrial Base Policy (MIBP) office  claims responsibility for ensuring the health, viability and resiliency of the  industrial capabilities that DOD needs. For nearly a decade, MIBP has  reported on various challenges that, if left unaddressed, could impede a  supplier’s ability to provide SRMs for DOD’s missile programs. Since at  least 2009, DOD has identified the health of the SRM industrial base as  an area of concern, driven, in part, by constrained budgets that have led  to decreased spending to procure missiles that use SRMs. The Senate  Appropriations Committee has also weighed in with concerns— particularly regarding SRMs for tactical missiles such as the Advanced  Medium Range Air-to-Air Missile (AMRAAM)—about reduced spending  and the use of foreign suppliers.

As a result of these concerns, you asked us to review the state of the  U.S. supplier base that provides SRMs for tactical missiles. We  examined (1) SRM industry trends, (2) single source supplier risks, and  (3) opportunities for SRM manufacturers’ engineering workforce  development.

To determine SRM industry trends, supplier risks, and workforce  opportunities, we reviewed DOD industrial capabilities reports provided to  Congress from 2009 to 2016. Three of these reports focused exclusively  on DOD’s assessment of SRM industrial capabilities—contractors’  knowledge, skills, facilities, manufacturing processes, equipment and  technologies that enable the production of SRMs. These reports  provided insight into the risks to the SRM industrial base and helped us  determine actions that DOD has taken to address such risks. Given new  entrants to the SRM market for tactical missiles, we reviewed DOD’s  fiscal year 2009 through 2017 budget data to gain additional insight into  its demand for tactical missile programs. We also reviewed information  provided by the prime contractors and SRM manufacturers. We  interviewed officials from MIBP and the military departments responsible  for identifying industrial base risks to determine their processes for  identifying, analyzing, and responding to industrial base risks. We also  interviewed representatives from the two prime contractors that produce  missiles for all of DOD’s tactical missile programs as well as some  strategic and missile defense programs. In addition, we spoke with  officials from the three SRM manufacturers with facilities in the United  States to understand the risks to them and their suppliers.

We conducted this performance audit from October 2016 to October 2017  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.
subsections: section_title: Background
subsections: section_title: Solid Rocket Motors (SRM)
paragraphs: SRMs are the propulsion systems that propel various types of missiles  and are also used in space launch activities, including the National  Aeronautics and Space Administration’s (NASA) Space Shuttle program.  Across the military departments, DOD has approximately 40 missile  programs that currently use SRMs, including tactical programs such as  the Army’s Guided Missile Launch Rocket System and the Navy and Air  Force AIM-9X Sidewinder.

As shown in figure 1, an SRM consists of a casing filled with solid  propellant that, when ignited, expels hot gases through a nozzle to  produce thrust. DOD describes the overall SRM components as being  consistent among the missile types, although size and scale of propellant  requirements vary. For example, tactical missiles use the smallest  SRMs—ranging from about 3 inches up to 24 inches in diameter—and  require between 3 and almost 1,600 pounds of propellant. Strategic  missiles use large SRMs that exceed 40 inches, while missile defense  systems utilize both small and large SRMs. Space launch SRMs can  exceed 150 inches and can require more than a million pounds of  propellant.

In order to be used in a missile, the SRM and its components, such as the  propellant ingredients or casing materials, are subject to testing to  demonstrate that they meet DOD’s technical specifications and  requirements. For instance, this testing can confirm that the construction  of the SRM allows it to function at certain altitudes or in certain  temperatures or environments required by the missile. The SRM is tested  as a stand-alone item and as part of the overall missile system before  production begins. By successfully completing testing, the missile  becomes qualified, and the SRM and its components are deemed  suitable to meet the missile’s specific requirements going forward. Any  changes in the SRM or its components may require additional testing  and, if the changes are significant or if there are multiple changes, may  require the missile to be retested and thus, requalified—which DOD has  noted is an expensive and time-consuming process that can take years  and cost millions of dollars.

section_title: SRM Supply Chain
paragraphs: DOD relies on a multi-tiered supply chain to provide the SRMs that are  used for missile propulsion. Industry representatives we spoke to  estimate the supply chain extends to more than 1,000 suppliers that  provide the raw materials, components, and sub-systems needed to  manufacture the SRM. The missile’s prime contractors are ultimately  responsible for delivering the missiles and for selecting and managing the  subcontractors that manufacture the SRM. The SRM manufacturers then  subcontract with suppliers that provide the components and materials  used to manufacture the SRM. Those suppliers might, in turn, work with  another tier of suppliers to meet their needs. For example, an SRM  manufacturer may obtain the materials needed for the casing from a first- tier supplier. The first-tier supplier may obtain the materials and  components it needs from multiple second-tier suppliers, and so on.  According to DOD reports, the SRM supplier base, including the sub-tier  suppliers, is nearly identical across missile defense, tactical, and strategic  missile systems that use SRMs. Figure 2 is an illustrative version of the  SRM supply chain.

Historically, the demand for SRMs was mostly driven by their use in solid  rocket boosters for NASA space programs, such as the Space Shuttle  program. DOD has reported that NASA’s retirement of the Space Shuttle  program in 2011 had a negative impact on the SRM supply chain as it led  to decreased demand for SRMs and the related raw materials and  components. Similarly, we reported in August 2017 that the demand for  solid rocket motor propellant had dropped by more than 75 percent, from  20 million pounds to 5 million pounds, since the end of the Space Shuttle  program. DOD has reported that these changing market conditions have  resulted in excess capacity, where production demand is less than what  is optimal to sustain the suppliers. Thus, excess capacity keeps SRM  manufacturers from being cost competitive, which can jeopardize the  viability of the manufacturers as well as their sub-tier suppliers.

section_title: MIBP’s Role in Identifying Industrial Base Risks
paragraphs: MIBP, which is part of the Under Secretary of Defense for Acquisition,  Technology, and Logistics, is DOD’s primary representative for issues  affecting the defense industrial base. MIBP officials told us they conduct  analyses of risks affecting defense supply chains and provide information  to decision makers, including required annual reports to Congress. These  reports cover a wide range of industrial capabilities for various types of  systems, including missiles. For example, in fiscal year 2014, MIBP  assessed the fragility and criticality risks facing missile production, by  analyzing factors that would cause potential disruptions and would be  difficult to replace if disrupted. This assessment identified solid rocket  motors as one of the key risks.

While individual program offices and military departments are generally  responsible for identifying risks within their own areas, MIBP officials  stated that they coordinate and share information with relevant  stakeholders for issues that affect multiple programs within or across the  military departments. MIBP’s coordination role, according to these  officials, includes participating in or leading various coordinating bodies  within DOD or other federal departments. For example, MIBP leads the  Joint Industrial Base Working Group, which shares industrial base  information across DOD agencies and military departments. In addition,  MIBP co-leads the Critical Energetic Materials Working Group, a DOD- sponsored entity that focuses on ensuring the near- and long-term  availability of energetic materials such as those used in SRMs, and  suggesting risk mitigation strategies.

MIBP officials told us that they also conduct an annual data collection  effort among the military departments and other DOD agencies to identify  defense industrial base areas of risk and to learn about ongoing issues  across the industrial base. In addition, they noted that MIBP works closely  with the Industrial Analysis Group within the Defense Contract  Management Agency (DCMA), which conducts assessments to identify  industrial base risks facing individual acquisition programs at various  points in the program’s life cycle and makes recommendations to  program offices to help sustain a resilient and innovative defense  industrial base. Additionally, DOD officials we spoke to said weapon  program-specific risks are communicated through the military  departments and to MIBP, which tracks them and determines their  implications for the industrial base.

section_title: Industry Trends Create Uncertainty for U.S. Solid Rocket Motor Suppliers
paragraphs: Over the last 20 years, the SRM industrial base has consolidated from six  to two U.S. manufacturers—Aerojet Rocketdyne and Orbital ATK. Both  manufacturers produce the small and large SRMs used in tactical and  missile defense systems, and Orbital ATK also produces SRMs for  strategic missiles. A senior MIBP official told us that current DOD needs  require two SRM manufacturers, but there is not enough demand to keep  three companies economically viable.

In DOD’s industrial base reports to Congress, MIBP has reported that,  while other industrial sectors are supported by commercial markets in  addition to government needs, SRM manufacturers cater largely to the  defense and space missions of the government and generally do not  have a commercial base that can sustain production when the federal  government’s demand fluctuates. As a result, similar to the impact of  NASA’s Space Shuttle retirement on the SRM supplier base, trends or  decisions made in a particular program area can have broader effects  and potentially result in cost increases for other programs. For example,  we found that a company that is supporting space launch has decided to  source its SRMs from Orbital ATK instead of Aerojet Rocketdyne, which  had previously produced the motors. This arrangement will take effect in  2019, and Aerojet Rocketdyne officials said that it is consolidating its  facilities to reduce costs due to excess production capacity for these  types of large SRMs. According to DOD, the resulting impact may affect  costs in Aerojet Rocketdyne’s remaining business units, including those  that provide the smaller SRMs used for tactical missiles. DOD says that  these costs would likely be passed on to the missile systems programs.  Additionally, if Aerojet Rocketdyne decides to exit the large SRM market  altogether, the lack of competition is likely to result in increased costs for  other DOD programs that use large SRMs.

When there is limited demand, then a small supplier base can also be  impacted by competition from foreign suppliers. Specifically, in the past  several years, the two U.S. manufacturers have faced competition from a  foreign supplier, Nammo Raufoss, and, more recently in 2017, a newly  established U.S. corporation, Nammo Energetics Indian Head, Inc.  (NEIH). These two new entrants are both ultimately wholly owned by the  same Norwegian parent company and, according to an MIBP official,  have the potential to take away market share from the two longstanding  domestic SRM manufacturers. Figure 3 shows the industry trends among  SRM manufacturers.

Nammo Raufoss, the foreign SRM manufacturer, began providing SRMs  for the AMRAAM program in 2012, after the U.S. SRM manufacturer had  encountered production challenges. According to an MIBP official, no  U.S. SRM manufacturer, including the supplier at the time, was offered  the opportunity to design a new SRM, which would have solved the  production issues. Further, according to the MIBP official, the Norwegian  government contributed funding to this effort. Additional funding was  provided by the prime contractor—Raytheon—and the program offices, to  develop, test, and produce the new SRM for AMRAAM.

Currently, Nammo Raufoss provides SRMs for two tactical missile  programs used by DOD—Evolved Sea Sparrow Missile and AMRAAM.  The programs for which Nammo Raufoss provides SRMs accounted for  approximately 4 percent of the tactical missiles procured by DOD in fiscal  year 2017, a slight increase over the 3 percent share since it first  provided SRMs for the AMRAAM missiles in fiscal year 2012. The  remaining missile programs use SRMs produced by Aerojet Rocketdyne  and Orbital ATK.

While the missile prime contractor found it viable to turn to a foreign  source for the AMRAAM program, Congress and DOD have been  concerned about the potential negative impacts the addition of a foreign  supplier could have on a fragile domestic SRM industrial base. For  example, the Senate Appropriations Committee recently noted concerns  about reduced spending and the use of foreign suppliers. Similarly, even  though DOD recognizes that access to global markets provides the  necessary competitive pressures to incentivize U.S. suppliers to remain  competitive and control costs, it has also noted that there needs to be a  commitment to investing in the U.S. SRM industrial base to develop and  produce critical technologies for the next generation of weapon systems.  Further, by law, DOD must limit specific conventional ammunition  procurements to sources within the industrial base if it determines such  limitation is necessary to maintain a facility, producer, manufacturer, or  other supplier available for furnishing an essential item of ammunition or  ammunition component in cases of national emergency or to achieve  industrial mobilization. According to MIBP officials, the current threat to  the existing U.S. SRM manufacturer from a foreign supplier is not great  enough to force it from the market. Therefore, it is difficult to restrict SRM  procurements to the U.S. industrial base. Instead, an MIBP official told us  they have raised concerns to DOD program offices and missile prime  contractors about expanding the use of the Norwegian SRM supplier,  Nammo Raufoss, as this potentially could have a negative impact on the  near- or long-term survivability of U.S. manufacturers.

Moreover, our review found that the newly established NEIH as a U.S.  SRM manufacturer also creates competition within the existing domestic  supplier base and also raises uncertainty for Aerojet Rocketdyne and  Orbital ATK. Specifically, NEIH is in the early stages of establishing its  production capabilities, which includes remodeling the manufacturing  facility at Indian Head, over the next three years. Further, an MIBP official  told us that MIBP plans to monitor the competitive landscape among the  three companies, but as NEIH is a U.S. company, it is considered a part  of the domestic industrial base and would not be subject to DOD  restrictions on foreign suppliers. At this stage, it is too early to tell how, if  at all, the newest competitor, whose product line is focused on small  SRMs, will disrupt the business of the two long-standing U.S. SRM  manufacturers that produce large and small SRMs.

section_title: Single Source Suppliers Drive Material Availability Risks but Mitigation Actions Underway
paragraphs: During our review, we found that the decreased demand for SRMs has  resulted in a loss of suppliers in the supply chain, increasing the risk that  key components and materials are only available from single sources.  Should such components and materials become unavailable, production  delays could result. MIBP’s industrial base reports to Congress and our  discussions with industry representatives showed increased awareness of  supply chain risks and steps taken to identify and mitigate risks before  they affect SRM production, including coordination of efforts to address  key chemicals needed for SRM propulsion.
subsections: section_title: Single Source SRM Suppliers Increase Risk
paragraphs: As decreased demand for SRMs has contributed to the consolidation of  manufacturers, a main concern for DOD and industry is the impact of  similar reductions among the manufacturers’ sub-tier suppliers. According  to MIBP’s reports to Congress, relying on a decreased number of sub-tier  suppliers exacerbates the risk that needed SRM materials become  unexpectedly unavailable and disrupt missile production. MIBP  emphasizes that in the current lower-production environment, sub-tier  suppliers who are primarily supporting defense and space missions rather  than commercial businesses, must determine how to remain viable or  decide to exit the SRM market. SRMs contain few commercial off-the- shelf components and a great number of defense-unique components,  which leads to an extensive reliance on sole-source suppliers.

Further, DOD reported that the missiles that are powered by SRMs  experience rapid production during times of conflict. While surge  production can create additional business opportunities, it is greatly  impacted by the availability of materials and components that comprise  the SRM for the missile. Industry representatives told us that managing  complex supply chains is a part of their business, but noted that there has  been a great deal of consolidation among SRM suppliers in recent years.  One SRM manufacturer estimated that the supply chain has dropped  from approximately 5,000 sub-tier suppliers to about 1,000 suppliers over  the last 20 years. As a result, manufacturers are heavily dependent on  only one supplier for some of the raw materials and key components of  the SRM. For example, manufacturers provided us with information  showing that they rely on a single company for ignition components for  most of the tactical missiles they produce.

Single Source Supplier Issues for the  Advanced Medium-Range Air-to-Air Missile  (AMRAAM)   A U.S. manufacturer experienced problems  with the propellant mixture used in the  AMRAAM solid rocket motor (SRM). The root  cause was not discovered, but experts  believe that variation in the raw material for a  particular propellant ingredient resulted in the  SRM functioning differently than intended. As  a result, Raytheon, the prime missile  contractor, stopped accepting the  manufacturer’s SRMs in 2010 and AMRAAM  production was disrupted for about 2 years. At  the time, Raytheon had been working to  qualify a second SRM supplier. According to  DOD, the qualification process was  accelerated to speed up production of the  missiles that were needed to support military  operations. AMRAAM production resumed  approximately 2 years after the SRM issues  occurred.

These dependencies increase as they move into the lower tiers of the  supply chain. Components can be available from one source for either of  the following two instances: (1) only one sole source is available for the  material, component, or chemical and no other alternative exists; or (2)  other suppliers exist, but only one single source supplier has been  qualified or chosen to produce the item. Either situation poses a risk of  disrupting the supply of SRMs and ultimately, the production of the  missile. DOD officials noted that, even if other suppliers exist, it can be  costly and time-consuming for them to be qualified as alternative sources.  For example, in its assessments, DCMA has stated that energetic  materials—which are used in SRM propellants—are among the most  expensive components to requalify. As there are approximately 25 to 30  ingredients in the typical SRM’s propellant, changes in any of the  ingredients require that the propellant be retested for effectiveness.

Further, disruptions among single source suppliers can take place for  other reasons besides leaving the market. Production changes, such as  altering manufacturing processes or even relocating production facilities,  can affect the material or component produced in unexpected ways. In  addition, there has been a long-standing concern that SRM  manufacturers are dependent on a single source supplier for an SRM  propellant ingredient—ammonium perchlorate—as only one U.S.  company is certified to provide this ingredient. The House version of the  Fiscal Year 2018 National Defense Authorization Act calls for DOD to  study the future costs and availability of ammonium perchlorate. MIBP  officials told us they have conducted extensive analysis of the issues for  this critical component, including two studies conducted in 2016.

section_title: Industry’s Efforts to Manage Its Supply Chain
paragraphs: Industry representatives from missile prime contractors and SRM  manufacturers we spoke with said that managing their supply chain to  ensure the availability of needed materials is a primary concern. Prime  contractor representatives said that SRM subcontractors are generally  expected to manage their suppliers and ensure that they suppliers can  meet their contract requirements. However, the prime contractors said  they are particularly involved when the risks relate to material availability.  While losing a supplier is always a risk, they try to mitigate this through  increased awareness of their supply chains and taking quick actions  when risks are identified.

To increase awareness, prime contractor representatives said they  consider potential availability issues before contracts are awarded and  include requirements that they be notified of these issues in their  subcontracts, which the SRM manufacturers apply to their subcontract  suppliers, in order to minimize surprises. One SRM manufacturer  confirmed that it includes subcontract requirements for its own sub-tier  suppliers to report any changes in the product, materials, or  production location as soon as the change is known.

In addition, both of the U.S. SRM manufacturers noted that they have  staff dedicated to monitoring potential issues with supply chain  availability. In one case, a manufacturer conducted a business  continuity study that analyzed suppliers’ business plans for the next 5  years to identify potential problems.

After issues—such as a financially fragile supplier—are identified,  representatives said the key factor is the amount of time they have to  mitigate the issue. In this respect, the U.S. SRM manufacturers we  spoke with said their processes have improved in recent years and  they receive more advanced notice when suppliers plan to exit the  market, allowing them to take steps such as stockpiling supplies or  making last buys while additional suppliers are identified. Taking such  steps also allows time to more fully assess and take necessary  steps—including qualifying a new supplier, if needed.

section_title: DOD Efforts to Respond to Supply Chain Risks
paragraphs: MIBP officials told us that they coordinate regularly with industry and the  affected DOD program offices to be informed of potential issues in the  supply chains, but noted that it can be challenging to be aware of SRM  suppliers beyond the initial tiers. However, the officials said that through  their coordination efforts—which include participating in multiple working  groups with the military departments and DOD components, as well as  NASA and industry—they are aware of the SRM sub-tier suppliers that  are at the greatest risk. For example, MIBP co-leads the Critical Energetic  Materials Working Group to track availability issues with the chemicals  that DOD relies on, including SRM propellant ingredients. Officials said  that MIBP also works closely with DCMA, which conducts industrial base  assessments that provide additional insights into contractors’ supply  chains. Further, officials said that MIBP is in the early stages of  developing a business analytics tool to help them better understand the  interdependencies in the sub-tier supplier base. Their hope is to be able  to proactively identify risks, rather than wait for program offices or DCMA  to elevate concerns to MIBP.

DOD officials and industry representatives identified cases in which  actions were taken when essential materials—typically chemicals—were  at risk of becoming unavailable. For example, MIBP coordinated with  other DOD stakeholders and industry to mitigate risks in the cases  summarized in table 1.

Additionally, an official said that MIBP is conducting a munitions industrial  base resiliency study in 2017 that addresses, among other issues, how  DOD plans for risks in the missile sector, particularly those related to the  loss of qualified suppliers, including for SRMs.

In September 2017, we reported that DOD program offices have limited  information from contractors that would help them to identify and  proactively manage risks stemming from a single source of supply for  missile systems, among other items. We recommended that DOD  develop a mechanism to ensure that program offices, such as those for  missile programs, obtain information from contractors on single sources  of supply risks. DOD concurred with this recommendation and indicated  that modifications to current contractual regulations and policy would be  beneficial. In light of DOD’s planned actions in response to our previous  recommendation, we are not making any additional recommendations at  this time.

section_title: Manufacturing Engineers’ Solid Rocket Motor Design Skills Declining but Workforce Project Initiated
paragraphs: MIBP’s annual industrial capabilities reports to Congress have  consistently stated that the limited number of new missile development  programs inhibits DOD’s ability to provide opportunities that maintain the  workforce capabilities SRM manufacturers need to meet current and  future national security objectives. These capabilities include engineering  skills related to SRM concept designs, system development, and  production, which are critical to meeting potential requirements for new  SRM designs. With few new-start missile programs being initiated and  decades-old programs having reached a steady state of design, SRM  engineers are not typically engaged at the early stages of development  and newer engineers have not fielded new SRM designs, thus creating a  skills gap. According to reports from DOD, the lack of new programs for  missiles has also limited opportunities to recruit and train the next  generation of SRM scientists and engineers. The SRM manufacturers we  spoke with also acknowledged experiencing attrition among workers with  the requisite experience, as design experts are at or near eligibility for  retirement. Industry representatives noted that engineers and chemists do  not typically go to school to become SRM engineers, but must be trained  by the SRM manufacturers. In a report to Congress, MIBP stated that one  SRM manufacturer estimated that it can take up to 5 years to fully train  SRM engineers or production workers.

Key to this issue is the limited number of new missile programs or  updates requiring new SRM designs, which would provide the workforce  with development opportunities that DOD and industry find to be critical.  Current research and development efforts are generally limited to updates  or modifications for legacy missile programs, rather than for new missile  programs. For example, the Joint Air-to-Ground Missile, a tactical missile  program that officials said has started and stopped development several  times since the late 1990s, had planned to incorporate a new SRM  design. However, due to budget limitations and affordability concerns  related to the SRM, the program opted to use a legacy SRM from the  Hellfire missile, which has been in production since 1982. While the  legacy SRM requires some modifications to change the casing material  from steel to composite materials that are stable enough to withstand fire,  mechanical shocks, and shrapnel, yet still burn correctly to propel the  warhead and destroy the intended target, it does not involve the same  level of skill as is needed to design new SRMs. Similarly, a DOD official  said the AIM-9X program proposed designing a new SRM, but this plan  was later abandoned due to concerns about the overall program costs.  There are currently only two missile programs—Army’s Long Range  Precision Fire missile and the Navy’s Advanced Anti-Radiation Guided  Missile Extended Range—planning to use new solid rocket motor  designs. Although these programs present opportunities for industry to  develop SRM design skills, MIBP does not believe it will close the current  skills gap. Further, MIBP officials said they have raised concerns that the  use of foreign SRM suppliers results in fewer opportunities for domestic  SRM manufacturers such as exercising their design skills. For example,  MIBP noted that domestic engineers did not have the chance to design  the new SRM used by AMRAAM.

In its reports to Congress, MIBP has stated that the loss of design  capabilities could result in costly delays and unanticipated expenses and  impair DOD’s readiness to support existing systems and field new  capabilities. One of the elements that heighten SRM criticality for missile  systems is the long lead time for restarting production in the event of  stoppage. Specifically, one MIBP report stated that SRM manufacturers  estimated that it can take from 3 to 5 years to fully restart if there is some  ongoing production, and up to 8 years if production has completely  ceased. In addition, according to MIBP, restarting production processes  would incur costs, including those associated with retraining engineers.  MIBP also indicated that the loss of SRM capabilities could delay future  development of missile programs by 5 to 10 years.

MIBP has an effort underway intended to address these diminishing  design skills. According to MIBP officials, in 2016 they awarded a 4-year  risk mitigation project that will provide approximately $14 million to Orbital  ATK and Aerojet Rocketdyne during the course of the project. The  purposes of the project are to provide opportunities for the SRM  manufacturers to develop new SRM design skills for less experienced  engineers and mature advanced technologies. The engineers will  incorporate technology into a new SRM as designed by each company.  According to an official, MIBP provided general guidelines for the  resulting SRM, but purposely did not provide strict specifications in an  effort to allow engineers to identify their own solutions for a new motor  design.

section_title: Agency Comments
paragraphs: We are not making recommendations in this report. We provided a draft  of this report to DOD for comment. DOD reviewed the draft and offered  technical comments, which we incorporated as appropriate.

We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, and other interested parties. In  addition, the report is available at no charge on the GAO website at  http://www.gao.gov.

If you or your staff have any questions about this report, please contact  me at (202) 512-4841 or makm@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in the appendix.

section_title: Appendix: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
paragraphs: Marie A. Mak, (202) 512-4841 or makm@gao.gov.

section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Candice Wright (Assistant  Director), Alyssia Borsella, Jennifer Dougherty, Leigh Ann Haydon, Emily  Bond, Lorraine Ettaro, Kurt Gurka, and Roxanna Sun made key  contributions to this report.

Fast facts: Solid rocket motor (SRM) propulsion systems play an important role in the nation's defense. Using a solid propellant that expels hot gases when combusted, SRMs provide the thrust behind a variety of DOD's missiles—from short-range tactical missiles to longer-range strategic ones.

But the industrial base for SRMs has shifted. U.S. manufacturers have consolidated, and foreign-owned manufacturers have entered the market. According to one estimate, the number of suppliers of raw materials, components, and sub-systems fell from 5,000 to 1,000 over the last 20 years. In this report, we examine SRM trends, risks, and opportunities.

Question-summary annotations: questions: question: What changes taken place in the solid rocket motor industrial base?
answer: Over the past two decades, the solid rocket motor (SRM) industrial base has undergone various changes including consolidation and recent expansion. Specifically, since 1995, the industry has consolidated from six U.S. manufacturers to two U.S. manufacturers.
child_questions: question: What were some of the effects of the expansion?
answer: With regard to expansion, a foreign supplier entered the market in 2012, and in 2017, a U.S. firm, which is ultimately foreign-owned, was also established.

question: Why are there only two manufacturers affiliated with SRM?
answer: According to the Department of Defense (DOD) while it supports competition, its current demand for SRMs can only sustain two manufacturers.
child_questions: question: Why is there not much known about these two manufacturers at this moment?
answer: Although at this stage it is too early to know how, or if, these new entrants will impact the economic viability of the more long-standing U.S. manufacturers.

questions: question: What else has been affected by the consolidation in the SRM base?
answer: The consolidation in the SRM industrial base has also been accompanied by a decrease of suppliers throughout the supply chain.
child_questions: question: What is the potential trajectory of this decrease?
answer: or example, one SRM manufacturer estimated a decrease in suppliers, from approximately 5,000 to 1,000, over the last 20 years.

question: How does the limiting of supplies impact the base?
answer: This increases the risk of production delays and disruptions in the event that key components and materials available from a single source become unavailable from that source.
child_questions: question: What is being done to offset these risks?
answer: GAO found that DOD and industry are taking steps to identify and mitigate these risks, such as by establishing alternative sources and requiring advance notice when suppliers are considering exiting the market.

questions: question: What is hindering the new missile dvelopment programs?
answer: In its annual industrial capabilities reports to Congress, DOD has consistently stated that the limited number of new missile development programs inhibits its ability to provide opportunities to help SRM manufacturers maintain their workforce capabilities.

question: How does the reduction of these programs in turn affect other employees affiliated with these programs?
answer: Specifically, with few new missile programs being initiated, engineers have had fewer opportunities to develop their engineering skills related to SRM concept designs, system development, and production, which are critical if SRM performance issues arise.
child_questions: question: What steps are being taken to help accommodate less experienced engineers?
answer: However, in 2016, DOD funded a 4-year project to enhance engineering design skills for less experienced engineers working for the two U.S. manufacturers and help them develop advanced SRM technologies.

questions: question: How does the DOD provide SRMs?
answer: DOD relies on a multi-tiered supply chain to provide SRMs, the propulsion systems behind the various missile systems that provide defense capabilities to meet U.S. national security objectives.

question: What is the makeup of the SRM industrial base?
answer: The SRM industrial base includes manufacturers that turn to an extensive network of suppliers that provide the raw materials, components, and subsystems needed to build SRMs.
child_questions: question: What is DOD's strategy for this base?
answer: DOD is responsible for developing a strategy for the national industrial base that ensures that defense contractors and their suppliers are capable of providing the goods and services needed to achieve national security objectives.

questions: question: What was included in the GAO's review of the U.S. industrial base?
answer: GAO was asked to review the state of the U.S. industrial base for SRMs. This report addresses (1) SRM industry trends, (2) single source supplier risks, and (3) opportunities for SRM manufacturers' engineering workforce development.

question: How did GAO obtain  information for the report?
answer: GAO analyzed DOD's annual industrial capabilities reports to Congress for fiscal years 2009 through 2016, which reflect DOD's most current information on SRM risks, and reviewed DOD budget data and information from missile prime contractors and SRM manufacturers.
child_questions: question: What other steps were taken by GAO in order to create their review?
answer: GAO also interviewed missile prime contractors, SRM manufacturer representatives, and officials from DOD and the military departments.