OPED By Air Marshal Anil Chopra (Retired)
The US Department of Defence (DoD) released its first National Defence Industrial Strategy (NDIS) in January 2024. The 59-page document is meant to guide the US defense industrial base for resource prioritization to create a resilient defense industrial ecosystem to meet evolving threats and the demands of challenging national security in the immediate future.
The US finally sees China’s economic rise and military production capabilities as a threat to the world order established since World War II. The US also finds itself in a peculiar situation of reducing global influence and being mired in complex positions in conflicts in Ukraine, Gaza, and the Red Sea.
Influential US Defence Industrial Complex
The US defense industrial base has traditionally had significant global influence. They have been major suppliers of defense equipment to the entire world for nearly a century.
The term military-industrial complex was first used by US President Dwight D. Eisenhower in his farewell address on January 17, 1961. Eisenhower cautioned that the United States must “guard against the acquisition of unwarranted influence by the military-industrial complex.”
The military-industrial complex tended to lobby for policies that might not be in the country’s best interest, such as the arms race.
Eisenhower feared that its growing influence if left unchecked, could undermine American democracy. There are some independent analysts who believe that because of this, the US is always looking for who to punish next.
The US military-industrial complex benefits most if the US remains at war.
Defence Industry Policy Why?
Any industry must keep evolving with changing times and evolving technologies. In the case of defense, it has to cater to evolving threats. It must be able to meet the demands of future conflicts and be ahead of the competition.
It also supports security through deterrence. US defense manufacturing capability and lead helped them win both the World Wars and the Cold War. As US military-industrial dominance began getting challenged, it was decided to have the NDIS.
The National Defence Industrial Strategy
The ‘peace dividend’ at the end of the Cold War had resulted in a level of ‘procurement holiday’ that saw dramatic cuts in military force structure, weapons production, and corresponding stockpiles of munitions and materials. The major prime contractors and their suppliers called 1993 the ‘Last Supper.’
China has become the global industrial powerhouse in many key areas, from shipbuilding to critical minerals to microelectronics, and it vastly exceeds the capacity of not just the United States but the combined output of the USA’s European and Asian allies. Ukraine and Gaza conflicts uncovered different sets of industrial demands and corresponding risks.
The NDIS is the logical next step after the 2022 National Defence Strategy (NDS), which enunciates the need to counter increasingly coercive actions taken by China that has demonstrated its intent to reshape the Indo-Pacific region and broader international system to fit its authoritarian preferences, and the Russian Federation’s invasion of Ukraine underscores the acute threat the USA feels it can exert on Europe.
These threats, along with transboundary challenges like COVID-19, demonstrate the imperative for increased and improved defense capabilities for the United States and its allies and partners.
The NDIS broadly focuses on four main areas.
These are resilient supply chains, workforce readiness, flexible acquisition, and economic deterrence. It also tries to address the slow-to-adapt government acquisition process.
It suggests expanding the production base, imbibing newer technologies through focused R&D, and securing indigenous research and production from intellectual theft. The NDIS links America’s economic security and national security and the need for mutual reinforcement and keeping the American military strength tied to its overall industrial strength.
Trade-offs that typically occur between cost, speed, and scale need aggressive review to cater to current acute threats. There is a need to move aggressively toward innovative, next-generation capabilities while continuing to upgrade and produce, in significant volumes, conventional weapons systems already in the force. Plans are to bolster and expand America’s ability to innovate and produce war-fighting capabilities at a speed and scale that will help guarantee the ability to fight and win in any conflict.
Additionally, the industry has to recognize and continuously adapt to the constantly evolving cyber threat to ensure products are built and operate effectively while ensuring that critical information and technologies are protected. Building partnerships with like-minded countries is emphasized.
The NDIS is not just a conceptual document but looks at the practicality of implementation and review mechanisms.
The strategy focuses on the short and medium-term time horizon and also aims to achieve a ‘generational change’ in how US companies produce defense products and how the Pentagon buys them.
The NDIS will guide the DoD’s engagement, policy development, and investment in the industrial base over the next three to five years. The strategy has evolved after months of interaction with all stakeholders: government, military, analysts, and industry.
Supply Chain Resilience
The supply chain-focused executive order (EO 14017) was issued in February 2021, obligating the DoD to spend over $893 million for investments in five critical sectors such as kinetic capabilities, micro-electronics, energy storage and batteries, strategic and critical materials, and castings and forgings.
These were planned to be addressed through forward-looking initiatives such as the Industrial Base Analysis and Sustainment (IBAS) program aimed at maintaining the health and capabilities of vulnerable DoD suppliers.
One major change for the industry will be a shift away from the just-in-time (JIT) delivery practices that were once popular to cut inventory costs. To meet the challenge of China, they need to shift away from JIT towards sustainment and procurement.
The munitions consumption in the Ukraine conflict far outpaced the production capacity of US companies. It will thus incentivize domestic production of critical components, add manufacturing capacity, and build stockpiles to decrease short-term risk.
Supply chains can be secured by public-private partnerships and by putting in place risk mitigation and sharing mechanisms. Broadening supplier base and increasing stockpiles of strategic and critical materials and sub-systems are planned. Promote flexible acquisition strategies, the document says.
The NDIS supports prioritization of commercial, off-the-shelf (COTS) acquisition wherever possible with modifications to secure the equipment. In addition to greater economic costs, sub-tier suppliers can face additional challenges that prime contractors do not, and these need addressing.
Additionally, the DoD maintains the Manufacturing Technology Program (ManTech), which seeks to develop advanced manufacturing processes, techniques, and equipment to develop, produce, and sustain weapon systems and additive manufacturing. They are looking at government-owned, contractor-operated (GOCO) facilities and finance streams, such as private equity and venture capital.
Workforce Development
The US lacks the required number of skilled workers to meet defense production demand while driving innovation at all levels. This shortfall is becoming exacerbated as baby boomers retire and younger generations show less interest in manufacturing and engineering careers.
This skilled manpower shortage is visible across the globe. Workforce development means investments in skill development programs and expanding the recruitment base, including from foreign lands. Skilled Indian manpower is a huge resource being tapped.
Lack of the science, technology, engineering, and math (STEM) skills needed for industrial work are being handled through initiatives such as the Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act for fostering workforce development programs, both academic and occupational.
Partnering with high schools, colleges, and universities to challenge the stigma associated with trade occupations helps. Also promoting and investing in partnerships with educational institutions to increase awareness of the value of industrial base careers. They are investing in up-skilling and reskilling programs.
Exportability Increase
The US defense industry has always tried to reap dividends of exportability and exploited economies of scale. They try to in-build exportability during the system design phase itself rather than postproduction. The F-16 and F-35 aircraft programs are great examples, among many others. Creating new mechanisms for sharing technology with allies supports this.
The Foreign Military Sales (FMS) program is a critical tool used to achieve US foreign policy objectives, as well as strategic outcomes. It deepens interoperability across the spectrum of capabilities.
FMS also helps achieve economies of scale by sharing some of the burden of acquisition and sustainment across the lifecycle of platforms, which in turn strengthens global strategic congruence and interoperability. There are plans to simplify the FMS process and accelerate the responsiveness of the FMS system with an eye toward reducing acquisition timelines for friendly countries. This will also help increase defense exports.
New Acquisition Practices
The acquisition practices, which have often been accused of adding to both costs and delivery timelines, will see changes. These include greater emphasis on using off-the-shelf technologies and retaining greater intellectual property ownership for the government.
There are plans for substantive ‘policy reform of contracting strategies’ and to reduce ‘scope creep’ and reduce requirements later. Typically as it happened in the F-22 aircraft program. The US needs to orient the acquisition policy for aggressive expansion of production capacity.
NDIS Challenges
Achieving priorities depends on the numerous stakeholders in national security and the defense industry, which include executive departments and agencies, government-owned facilities, traditional defense contractors, non-traditional companies, global Allies, and partners to effectively collaborate to manage the complex known and unknown technical, manufacturing, and logistical challenges.
Unfair trade practices and non-competitive policies employed by countries like China, including subsidies, dominance-driven acquisitions, hidden ownership, and transfer of critical technology, flouting trade agreements, have also harmed the USA. The US is trying to strengthen the prohibited sources policy.
Several factors, including changing priorities, program cancellations, compliance burdens, funding challenges, and technology obsolescence, have disincentivized the traditional defense industrial base (DIB) manufacturers to maintain production capacities beyond short-term demands. There is also limited visibility on international partners and allies. Like in the case of NATO ally Turkey, sanctions had to be imposed.
There is a need to invest in critical minerals and materials. Fostering innovation is important. China has overtaken the USA in a number of annual patents.
Project management needs to be tightened because often, there are uncontrolled increases in developmental costs. Often, allies are more closely bound than partners. This needs to be strengthened or factored through multiple mechanisms.
Owing to rapid technological advancements and long development time associated with extensive customization, it can also lead to the systems becoming outdated and obsolete. Also, over, customized systems have limited diversification possibilities and require customized maintenance. Therefore, there is a need for more COTS policies.
Promoting investment in advanced manufacturing automation streamlines and compresses development and production processes, reduces human intervention, lowers unexpected downtime, and improves overall manufacturing performance.
Lessons for India – Approach Ahead
India needs to look at the NDIS closely and draw its own lessons. All these may not apply, but the fact that we are importing many defense platforms and systems from the US, we have to factor in their industrial dynamics and understand the psyche.
We have to factor in the general global perception that the USA is an unreliable partner and can jettison an ally for geopolitical reasons, insist on some level of assurance, and factor in our own safety.
Atmanirbhata (self-reliance) in defense production and critical material supply chains remains the most important and continuously needs to be driven. More must be spent on R&D to build its own intellectual property.
India should be able to register for more defense technology patents. Complex war-fighting requirements may drive highly customized material solutions. The attempt must be made to simplify. COTS reduces development time and costs. MSMEs are key components and sub-system suppliers. These require greater hand-holding by the government and large corporates.
The DTIS document already identifies a web of USA’s friend-shoring-suitable alliances and partnerships around the world, and the list includes Australia, Canada, the European Union, India, Israel, Japan, Mexico, South Korea, Taiwan, and the United Kingdom.
India would require partners, especially for high-technology systems. Defence diplomacy will pay dividends. Geopolitical risks would have to be factored in.
Defense imports and partnerships must be balanced from a position of strength through strategic autonomy. India must balance its defense procurement sourcing basket. In the next two decades, it should target 40% Indian, 30% Russian, and 30% Western.
India must gradually reduce its dependence on adversarial China-linked supply chains.
In order to promote indigenous design and development of defense equipment, the Buy Indigenously Designed, Developed, and Manufactured (Indian-IDDM) category has been accorded top priority for the procurement of capital equipment. Indigenous production with Transfer of Technology (ToT) from foreign OEM gets priority.
An innovation ecosystem for defense titled Innovations for Defence Excellence (iDEX) is in place to foster innovation and technology development. To enable the adoption of Artificial Intelligence in defense, the Defence AI Council (DAIC) and Defence AI Project Agency (DARPA) have been created.
Further, an AI roadmap has also been finalized. The Technology Development Fund (TDF) Scheme also funds industries, especially start-ups and MSMEs, up to an amount of Rs. 10 Crore for innovation.
Till April 2023, a total of 606 Industrial licenses had been issued to 369 companies operating in the defense sector. The defense products list requiring industrial licenses has been rationalized, and the manufacture of most parts or components does not require an Industrial License. Positive indigenization lists now cover nearly 5,000 weapon systems or components.
India already has a Ministry of Skill Development and Entrepreneurship, which is headed by a technocrat. Manpower retention and reskilling are being looked at.
Lastly, India must also make an NDIS equivalent document or improve upon the one if it already exists. This will not only prioritize the sector but will bring clarity to industrial planning and skill development. It will increase partnership and ownership by all stakeholders. It will move India quickly forward on the defense manufacturing value chain.
- Air Marshal Anil Chopra (Retired) is an Indian Air Force veteran fighter test pilot and is currently the Director-General of the Center for Air Power Studies in New Delhi. He has been decorated with gallantry and distinguished service medals while serving in the IAF for 40 years.
- He tweets @Chopsyturvey
- Follow EurAsian Times on Google News
