Defense supply chain vulnerabilities need near term fixes

BY ELAINE McCUSKER

A bipartisan congressional task force this week concluded that “overreliance on China in critical supply chains, particularly in the defense sector, creates significant strategic and competitive risk for the United States.”

The “Report of the Defense Critical Supply Chain Task Force” released on July 22, 2021 was the result of a 3-month review to “understand where the Department of Defense (DOD) is most vulnerable when it comes to procuring military-essential items.” The effort was specifically designed to produce legislation for inclusion in the fiscal year 2022 defense authorization bill, which the House Armed Services Committee will consider next week.

The task force defines defense supply chains as “the international networks that provide the goods and services needed to deliver finished products” to DOD. It further focused this initial effort to determine risk and vulnerabilities in four specific “critical” components of the supply chain plus the crosscutting element of the workforce. The four components are: semiconductors and critical electronic components; Rare Earth Elements (REE); energetic materials (propellants and explosives and supporting chemicals); and active pharmaceutical ingredients (APIs) and therapeutics.

The task force conducted rapid due diligence, holding nine round tables, and summarized the following discussion themes:

[N]either DOD nor the majority of the Defense Industrial Base (DIB) has sufficient visibility on the supply chain to understand its vulnerabilities; DOD cannot build resilience and mitigate risk in the supply chain without a firm understanding of where its materials and supplies are sourced and manufactured; and DOD must have visibility on the defense supply chain to understand its current vulnerabilities and understand its surge capacity in the next crisis.

The task force also repeatedly notes that the COVID-19 pandemic shined a spotlight on many of our vulnerabilities. During an event promoting the report at the Center for a New American Security, the task force’s co-chairs, Rep. Elissa Slotkin (D-Mich.) and Rep. Mike Gallagher (R-Wis.), emphasized that the pandemic allowed us to see that even reliance on non-adversarial nations can be dangerous: When our allies devolve into crisis, their supply chains may unintentionally break down, depriving us of essential goods. They stressed that this further demonstrates having duplicity in our supply chains inside and outside of the defense sector is necessary for the stability of United States.

The six legislative proposals, which are the key output of the task force, include requirements for DOD to: develop a risk and mitigation strategy; employ commercially available tools to map the supply chain; identify and reduce reliance on materials for end items that come from adversarial nations; establish a coalition and prioritize bilateral and multilateral discussions to attack identified supply chain problems; and coordinate with Energy and Interior on research and development.

Unfortunately, these proposals are unlikely to yield many positive outcomes unless they address — and resource — some of the foundational challenges. For example, the task force notes that: “data emerged as a critical component of a supply chain risk mitigation strategy,” but legislation to require DOD to produce additional risk assessments will not alleviate this underlying challenge. It would also be useful if broad policy proposals like those put forward by the task force were accompanied by proposals to repeal at least one outdated legislative requirement that currently consumes DOD resources on non-priority activities.

Finally, the task force does a good job summarizing the problem and making broad, policy statements like: “It is now incumbent on the U.S. Government, in concert with industry and allied nations, to mitigate critical defense supply chain risks, increase surge capacity, and enhance resilience by increasing the diversity of sources.” But such statements, and related observations like the recommendation to “scale appropriations to match policy goals,” are unlikely to result in any real positive action.

The task force calls useful attention to an important issue and its findings and conclusions can be used as a concrete jumping-off point. Its recommendations should be accompanied by a reduction in other lower-priority statutory reporting requirements to clearly emphasize direction to tangibly address the national security vulnerabilities exposed but its work.