Lynn: U.S. Must Preserve Its Defense Industrial Base

NEW YORK, May 12, 2011 — Com­pe­ti­tion, a glob­al defense mar­ket and tar­get­ed research and devel­op­ment spend­ing will be crit­i­cal in pre­serv­ing the nation’s defense indus­tri­al base dur­ing the slow­down in Pen­ta­gon spend­ing, Deputy Defense Sec­re­tary William J. Lynn III said here last night.

In keynote remarks at the Intre­pid Sea, Air and Space Muse­um for the Roy­al Bank of Cana­da Defense and Aero­space Con­fer­ence, Lynn said that because pre­serv­ing the indus­tri­al base’s capa­bil­i­ties is cru­cial, the Defense Depart­ment is devel­op­ing a roadmap to do it effec­tive­ly in an era of lim­it­ed fund­ing. The defense indus­tri­al base is a rel­a­tive­ly recent devel­op­ment in U.S. his­to­ry, Lynn said. 

“Before World War II, we relied almost entire­ly on an arse­nal sys­tem, in which the gov­ern­ment designed and pro­duced muni­tions and weapon sys­tems,” he said. “That arse­nal sys­tem was a corol­lary to our reliance on mass mobi­liza­tion — we fought wars and then demo­bi­lized. With no large stand­ing army, he added, the nation did­n’t need a stand­ing mil­i­tary indus­tri­al base. 

But the risks inher­ent in the arse­nal sys­tem became clear dur­ing World War I, the deputy sec­re­tary not­ed. “We were not able to pro­duce most of the weapons and the muni­tions that we need­ed to fight that war,” he said. “We had to rely large­ly on the British and the French indus­tries to sup­ply our troops.” 

The par­a­digm shift­ed with World War II, Lynn said, as the nation engaged the Amer­i­can indus­tri­al base, pro­duc­ing a tide of weapons and mate­r­i­al that con­tributed enor­mous­ly to win­ning the war — a devel­op­ment that large­ly elim­i­nat­ed the arse­nal sys­tem and cre­at­ed an endur­ing part­ner­ship of sci­ence, indus­try, and the mil­i­tary. “That part­ner­ship has giv­en us the tech­no­log­i­cal edge that we enjoy in bat­tle,” the deputy sec­re­tary added, not­ing that the muse­um where he was speak­ing — the air­craft car­ri­er USS Intre­pid — is a tes­ta­ment to America’s indus­tri­al prowess. 

Com­mis­sioned at the height of World War II, Intre­pid saw action in the Pacif­ic, Lynn told the audi­ence. It was trans­formed into an anti-sub­ma­rine car­ri­er dur­ing the Cold War, and its flight deck — the first fit­ted with a steam cat­a­pult — launched planes dur­ing the air cam­paign over Vietnam. 

“Our defense indus­tri­al base has emerged in the past three gen­er­a­tions as a nation­al strate­gic asset — an asset that is not a birthright and can­not be tak­en for grant­ed,” Lynn said. “Thou­sands of firms — some big, oth­ers small — equip our mil­i­tary. These firms, their sup­pli­ers, and their sup­pli­ers’ sup­pli­ers, are the links in a chain that, if bro­ken, can have out­size impact on our mil­i­tary capabilities.” 

Today’s defense indus­tri­al base is more glob­al, more com­mer­cial and more finan­cial­ly com­plex and com­pet­i­tive than ever before, Lynn said. “A one-size-fits-all pol­i­cy is not appro­pri­ate now for the defense indus­tri­al base, if it ever was,” he added. 

There­fore, Lynn said, he’s lead­ing an effort with Ash­ton B. Carter, under­sec­re­tary of defense for acqui­si­tion, tech­nol­o­gy and logis­tics, and Brett Lam­bert, deputy assis­tant sec­re­tary for indus­tri­al pol­i­cy, to put togeth­er a roadmap for ensur­ing the health of the indus­tri­al base as defense spend­ing slows down. 

“We’re going sec­tor by sec­tor, tier by tier, and our goal is to devel­op a long-term pol­i­cy to pro­tect that base as we slow defense spend­ing,” Lynn said. The review will inform defense spend­ing and acqui­si­tion deci­sions, he added, and also will deter­mine how the Defense Depart­ment views merg­er and acqui­si­tions pro­pos­als and activ­i­ties in the defense industry. 

“It will help us ensure that the tax­pay­ers’ invest­ment in this indus­tri­al base that we’ve built since World War II is pro­tect­ed,” he said. Three themes are emerg­ing about how to main­tain a vibrant indus­tri­al base, the deputy sec­re­tary said: com­pe­ti­tion, the glob­al defense mar­ket, and tar­get­ed spend­ing for research and development. 

Not­ing that vig­or­ous com­pe­ti­tion in the defense indus­tri­al base has pro­vid­ed the armed forces with more reli­able equip­ment and bet­ter tech­nol­o­gy than that of the nation’s adver­saries, Lynn said nor­mal mar­ket forces should con­tin­ue to shape the defense indus­try, ensur­ing it’s exposed to 21st cen­tu­ry tech­nol­o­gy, to tech­no­log­i­cal inno­va­tion, and to cap­i­tal markets. 

“Not only is this good eco­nom­ic the­o­ry,” Lynn said, “but it yields the best goods and ser­vices for the warfight­er.” The deputy sec­re­tary recalled the last defense slow­down in 1993, when then-Defense Sec­re­tary William Per­ry called indus­try lead­ers to a din­ner meet­ing at the Pen­ta­gon — a meet­ing that came to be known as “the Last Sup­per” — to tell them that reduced defense spend­ing would require indus­try to con­sol­i­date to cope with a reduc­tion in demand. The tax­pay­ers, Per­ry explained, no longer could afford to under­write the over­head of so many defense firms. In less than a decade, Lynn told the audi­ence, 50 major com­pa­nies con­sol­i­dat­ed into six. But a new Last Sup­per isn’t on the hori­zon, he added. 

“We are not look­ing for fur­ther con­sol­i­da­tion in the top tier of the defense indus­tri­al base,” he said. “Few­er major defense sup­pli­ers would not strength­en indus­try, nor would it ben­e­fit the gov­ern­ment. Indeed, it would real­ly rep­re­sent a return to some­thing like the arse­nal sys­tem that we dis­card­ed sev­er­al decades ago for good rea­son.” But that does­n’t mean the Defense Depart­ment oppos­es all, or even most, future con­sol­i­da­tions, Lynn said. 

“Merg­ers and acqui­si­tions are a nor­mal response to bud­get changes, and we should not reflex­ive­ly oppose this mar­ket reac­tion,” he said. “But we will be scru­ti­niz­ing pro­pos­als that come for­ward to ensure that the government’s inter­ests are pro­tect­ed. Adjust­ments that lead to greater effi­cien­cy or inno­va­tion will be wel­comed. We are seek­ing to pro­mote strong, well-financed busi­ness­es that avoid over-lever­ag­ing and poor bal­ance sheets. The intent is to ensure indus­try emerges stronger after these struc­tur­al changes.” Mean­while, Lynn said, the Defense Depart­ment intends to use its posi­tion as a buy­er, its sub­sidy of research and its abil­i­ty to fore­cast needs to boost invest­ment, com­pe­ti­tion and inno­va­tion to the max­i­mum pos­si­ble extent while still allow­ing mar­ket forces to pro­pel the sec­tor forward. 

“We are in this for the long term,” he said. “We need indus­tri­al part­ners and finan­cial back­ers who think and act like­wise. In this respect, our view­point is sim­i­lar to long-term invest­ment, not short-term spec­u­la­tion. Think War­ren Buf­fet, not Gor­don Gekko.” The sec­ond theme emerg­ing from the Defense Department’s study of the indus­tri­al base is the con­tri­bu­tion inter­na­tion­al sales make in sta­bi­liz­ing the defense indus­try when U.S. defense spend­ing slows, Lynn said. 

“To keep our base healthy, it is in our inter­est for defense com­pa­nies to com­pete glob­al­ly,” he explained. How­ev­er, he said, an “archa­ic” export con­trol sys­tem is imped­ing that dynamic. 

“It was devel­oped dur­ing the Cold War in a peer-to-peer com­pe­ti­tion with the Sovi­et Union that is long gone,” he said. “The Berlin Wall is gone, but many of these export bar­ri­ers remain.” That sys­tem fre­quent­ly fails in its cen­tral pur­pose of pre­vent­ing states of con­cern from acquir­ing sen­si­tive tech­nolo­gies, Lynn said, and it also makes it dif­fi­cult for close allies to buy weapons from U.S. com­pa­nies, even when they’re fight­ing along­side U.S. forces. 

“The bar­ri­ers that we place at this point in the export con­trol sys­tem look some­thing like a mar­riage of the com­plex­i­ty of the Inter­nal Rev­enue Ser­vice with the effi­cien­cy of the Depart­ment of Motor Vehi­cles,” he said. “It’s some­thing we have to change.” While the export con­trol sys­tem should build high walls around tech­nolo­gies that tru­ly are sen­si­tive, Lynn said, it also should allow U.S. com­pa­nies to com­pete on the glob­al mar­ket with tech­nolo­gies that are wide­ly available. 

Pres­i­dent Barack Obama’s admin­is­tra­tion is work­ing to bring about export con­trol reform, the deputy sec­re­tary said. The administration’s pro­pos­al is built on what offi­cials call “the four sin­gles” — a sin­gle export agency, a sin­gle tiered list of con­trolled items, a sin­gle coor­di­na­tion cen­ter for enforce­ment, and a sin­gle, uni­fied IT infra­struc­ture. The pres­i­dent and the sec­re­taries of state, defense and com­merce all are com­mit­ted to export reform, Lynn said. Relat­ed progress in this area, he added, includes pas­sage of defense trade coop­er­a­tion treaties with the Unit­ed King­dom and Aus­tralia, which may set an exam­ple of how a new export con­trol sys­tem might work. 

A par­al­lel effort seeks to change poli­cies for tech­nol­o­gy secu­ri­ty and for­eign dis­clo­sure, Lynn said. “How we trans­fer sen­si­tive tech­nolo­gies right now is gov­erned by 13 pret­ty inde­pen­dent process­es,” he said. “Those process­es aren’t inte­grat­ed, they’re not syn­chro­nized, and as a con­se­quence they often impede our abil­i­ty to equip our coali­tion part­ners.” A corol­lary of ensur­ing U.S. firms are com­pet­i­tive abroad is wel­com­ing inter­na­tion­al firms to the Unit­ed States, Lynn said. EADS — a Euro­pean firm — bid on the aer­i­al tanker con­tract with­out an Amer­i­can part­ner, he not­ed, and a strong com­pe­ti­tion ensued in which Boe­ing, an Amer­i­can com­pa­ny, ulti­mate­ly prevailed. 

“But the real win­ners were our warfight­ers who got a great tanker and the Amer­i­can tax­pay­ers who saved bil­lions of dol­lars,” he said. 

The third theme emerg­ing from the Pentagon’s indus­tri­al base study is the impor­tance of main­tain­ing a tar­get­ed research and devel­op­ment pro­gram, Lynn said, not­ing that although defense spend­ing plunged dur­ing the 1970s after the Viet­nam War, the Defense Depart­ment made sure that promis­ing research and devel­op­ment con­tin­ued — with stealth tech­nol­o­gy among the results of that effort. 

“Stealth tech­nol­o­gy — one of our most impor­tant advan­tages today — would­n’t be avail­able at all if it weren’t for the care­ful stew­ard­ship dur­ing the 1970s,” Lynn said. “Today, we need to con­cen­trate on the tech­nolo­gies that we think are going to be influ­en­tial in the next decade and the decade after.” Those tech­nolo­gies include long-range strike sys­tems, unmanned aer­i­al vehi­cles and cyber­se­cu­ri­ty, he said. 

“Each of these tech­nol­o­gy areas will be crit­i­cal in future con­flicts,” the deputy sec­re­tary said. “We do not yet know the shape they will take. We don’t know the pre­cise advan­tages they will con­fer. But unless we shield and pro­tect the [research and devel­op­ment] invest­ments and sup­port them now, we’re going to deny the future deci­sion-mak­ers the oppor­tu­ni­ty to bring to bear these tech­nolo­gies in our mil­i­tary forces. 

As part of his deficit reduc­tion plan, the pres­i­dent has called for $400 bil­lion in reduc­tions to the defense bud­get over the next 12 years, as well as a fun­da­men­tal eval­u­a­tion of America’s mis­sions, capa­bil­i­ties and role in a chang­ing world, Lynn said. 

Though these chal­lenges are enor­mous, he said, the depart­ment must take them on while fight­ing one war, wind­ing down anoth­er and par­tic­i­pat­ing in oth­er mis­sions around the world. “The road ahead will not be easy,” Lynn acknowl­edged, but he invoked a favorite say­ing of Defense Sec­re­tary Robert M. Gates: “Dif­fi­cult is not impossible.” 

“The chal­lenge for us is to man­age this slow­down in defense spend­ing with­out dis­rupt­ing the capa­bil­i­ties of the world’s most effec­tive fight­ing force,” Lynn said. “The best out­come would be for con­trac­tors to con­tin­ue to earn fair prof­its for supe­ri­or per­for­mance, the depart­ment to get qual­i­ty prod­ucts for an afford­able price, and the tax­pay­er to be able to under­write our secu­ri­ty at an accept­able cost. 

“I believe such an out­come is well with­in reach,” he con­tin­ued. “But we need to con­tin­ue to exe­cute the lessons of mak­ing tough choic­es ear­ly, pri­or­i­tiz­ing now, bal­anc­ing our reduc­tions and avoid­ing pre­cip­i­tous cuts.” 

Source:
U.S. Depart­ment of Defense
Office of the Assis­tant Sec­re­tary of Defense (Pub­lic Affairs) 

Face­book and/or on Twit­ter

Team GlobDef

Team GlobDef

Seit 2001 ist GlobalDefence.net im Internet unterwegs, um mit eigenen Analysen, interessanten Kooperationen und umfassenden Informationen für einen spannenden Überblick der Weltlage zu sorgen. GlobalDefence.net war dabei die erste deutschsprachige Internetseite, die mit dem Schwerpunkt Sicherheitspolitik außerhalb von Hochschulen oder Instituten aufgetreten ist.

Alle Beiträge ansehen von Team GlobDef →