Update on Industrial Base ConcernsIssues Presented to ICAP 12 February 2002

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Update on Industrial BaseConcerns/IssuesPresente
d toICAP12 February 2002

• Alan R. Beuster
• Chief, Industrial Base
• Assessment Division
• AMSOS-PBI
• [phone]
• E-mail beustera_at_osc.army.mil

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What is the Ammunition Industrial Base?

• 1991 2001
• Government-owned Facilities 28 13
• - Acres
  526K 351K
• - Equipment 483K
  302K
• - Production Lines 270
  73
• - Production Personnel 19K
  7K
• Contractor Facilities 163 69
• Contractor Facilities with 36 11
• Government-owned Equipment

Combination of Government-owned and private
sector facilities required - supports production
demands for all Services
Significant downsizing has occurred
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Purpose of Production Base
REPLENISHMENT DOD components will provide the
capability to replace in kind or with reasonable
substitutes, the projected consumption, damage or
destruction (for one major theater war) , troop
support items, spares, components, and assemblies
generally within 3 years.
PEACETIME Components will program to
sustain...production facilities...to support the
U.S. Defense Strategy.
US Defense Strategy
Replenish 1 MTW Following Conflict
Fight from Stocks
The Ammunition Industrial Base must 1) Satisfy
peacetime demands 2) Be ready to support next
generation technology/items 3) Be responsive
when called upon to meet replenishment demands
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Supports all Services
ARMY 21
AF 9
COMMON 38
MC 6
NAVY 26
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The Fragility of the Ammunition Industrial Base

• Production base capacity down 68 last ten years.
• Single source exists for 71 of 302 critical
  components
• Peacetime buys drive the baseyet POM buys exist
  for only 76 of 171 critical items lost critical
  skills, increased start-up costs, and minimal
  incentive for capital investment/new technology
• Industrial base is under-utilized. Base is
  estimated to be operating at 26 percent of
  capacity.
• No U.S./Canada source for certain critical
  components andothers at high risk
• Surge capability virtually non-existentcan only
  affect 10 of the go-to-war shortfalls
• Marginal capability for preferred and precision
  munitions. Affordability an issue. Requirements
  for legacy items will continue well into the
  future.
• Enduring Freedom Homeland Defense, and small
  scale contingencies will increase production base
  demands

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The Ammunition Industrial Base is at a Critical
Juncture How did we get here?

• Inadequate funding, fluctuations in buys, and
  lack of long term commitment has not sustained
  the base or fostered investment.
• Competition can have unintended consequence
  must include consideration/preservation of
  unique/ critical capabilities, i.e., nurture the
  base.
• Policies driven by affordability vs. warfighter
  needs.
• Policy changes diminish capabilities, e.g.,
  mobilization surge resupply
  replenish in 24 months replenish in 36
  months 1 versus 2 MTWs
• Push to divest of the organic base
• Focus on price versus price and readiness

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The Ammunition Industrial Base is at a Critical
Juncture What are we doing about it?

• Focus on continual support to our primary
  customer the warfighter (Allow risk versus
  policy and budget to drive decisions)
• Attempt to preserve critical core capabilities in
  the Government-owned base
• Continue to perform industrial preparedness
  planning and maintain plans/provisions for
  production demands
• Increase level of focus to second and third tier
  producers
• Market surveys
• Capability assessments
• Financial viability analysis
• Intense management of certain critical items
• Predict next items at risk/avoid next crisis
• Looking towards additional programs to help such
  as AMC Diminishing Manufacturing Sources Material
  Shortages Info System
• Acquisition strategies tied to industrial base
• Structure acquisition plans considering
  industrial preparedness planning provisions and
  TDP risk advisories
• Use of best value contracts consider readiness
  in awards made
• Use of multi-year contracts stability and
  longer term commitment to contractors

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Summary

• A mix of Government-owned and private sector
  facilities must continue to exist to meet
  ammunition demands.
• The ammunition production base is at risk and
  requires attention/nurturing.
• HQ OSC will continue to intensely manage the
  ammunition industrial base to maximize
  responsiveness to warfighter needs.

As we look to the future ..
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Throughout The Army Transformation
Transformation must include a holistic
munitions strategy.
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Relook at 2025

• Studies such as PBD 407 shaping/influencing the
  base
• Meetings with HQ AMC on strategic industrial base
  plan
• Challenged by GEN Kern to forward think and
  draw a new box
• Within HQ OSC future base reemphasized to include
  once again holding periodic meetings with
  commercial producers for their involvement/input.