This transcript is from a CSIS event hosted on January 11, 2024. Watch the full video here.
Seth G. Jones: All right. Welcome, everyone. Thank you for joining us as we discuss the recently released National Defense Industrial Strategy, released today.
I am delighted to be able to introduce the Honorable Dr. Laura Taylor-Kale, who’s the first assistant secretary of defense for industrial base policy at the Department of Defense. She is a former fellow with the Council on Foreign Relations, former deputy assistant secretary of commerce for manufacturing in the International Trade Administration. She also holds the role of senior advisor for policy and operations at the U.S. Overseas Private Investment Corporation, and was a special assistant to President Biden when he was vice president, consulting on matters of sustainable development and climate change. Besides being a former foreign service officer in the U.S. State Department, she holds a B.A. from Smith College, an MPA from Princeton, and an MBA from NYU, and a Ph.D. from Stanford. It’s pretty good. (Laughter.)
Actually, Cynthia, along the same lines. And she’s joined on stage by Cynthia Cook, the director of the Defense Industrial Initiatives Group at CSIS and a senior fellow in the International Security Program. Dr. Cook has published widely on a range of topics, including the Defense Acquisition policy and organization, the broader defense industrial base, new technology developments, weapons systems production, and sustainment. Dr. Cook is a member of the editorial board for the Defense Acquisition Research Journal, is an adjunct professor at the Pardee RAND Graduate School. She holds a Ph.D. from Harvard and a B.S. in management from the Wharton School at the University of Pennsylvania. So, two very distinguished individuals.
Before I hand the floor over to Dr. Cook, let me just briefly highlight how important I think not just this discussion is, but how important the National Defense Industrial Strategy. And this is coming from someone who’s not an expert on the – on the industrial base but is, certainly from a strategic standpoint, particularly mindful of the time that we’re in right now. As the war in Ukraine reminded many of us – maybe not all of us, but many of us – wars, including interstate wars, can be protracted. States can expend significant munitions, equipment can break down or be destroyed and there can be a whole range of other challenges including with supply chains and the workforce that can be impacted, even disrupted.
So the Defense Industrial Base is essential aspect of deterrence as much as it is for warfighting. In addition as many of us have analyzed the Chinese industrial base, the U.S.’ pacing threat, the main global competitor, it is moving swiftly building weapon systems in preparation for a possible war with the United States.
As Secretary of the Air Force Frank Kendall remarked recently, quote, “China is preparing for war and specifically for a war with the United States.” So this broader landscape, I think, makes this discussion particularly important including from a broader net assessment or relative perspective and I welcome Dr. Taylor-Kale here and I will hand this over to Cynthia.
Thank you.
Cynthia Cook: Thank you, Seth, and thank you, audience, both in person online for your attention today. I will highlight that after our conversation we will have time for questions and answers.
Rather than have somebody in the room walking the microphone around please point your phones to the QR code and we’ll answer questions and balance the questions from those in the room and the several times as many who are watching online. So I look forward to that.
But first I would like to welcome Dr. Taylor-Kale and offer you the opportunity to give us an overview of the new National Defense Industrial Strategy and what you hope to achieve with it.
Assistant Secretary Laura D. Taylor-Kale: Sure. Thank you. First of all, I’d like to thank you all for hosting me here. We have been really excited about today and the opportunity to come to CSIS and launch this strategy.
I also see a lot of familiar faces in the room, some of our key stakeholders, former DASDs for industrial policy or DUSDs for industrial policy. I have to say that the development of this strategy has definitely been a team effort and one in which we have engaged with partners and industry stakeholders on the Hill and certainly with a lot of folks who are in this room have given us comments, given us feedback, and I’d like to state off the bat that we’re really thankful for that and how much people have been willing to offer their knowledge and understanding of some of the challenges and also opportunities that are present for the Defense Industrial Base.
As Seth mentioned I’m the first Senate-confirmed assistant secretary of defense for industrial base strategy. I’ve been in office for exactly nine months – (laughs) – and it is really just a great pleasure to lead the team that has been involved in developing this first ever National Defense Industrial Strategy.
The strategy was something that the deputy secretary of defense and the secretary of defense wanted us to do and tasked the team to do literally the day after I was confirmed and so we have spent the last several months really building on a lot of the research that our teams have been doing, frankly, for the last few years of gathering lessons learned from Ukraine and COVID and what we had to do in order to mobilize to support the American people and also the Ukrainians and our global partners and allies in order to address some critical challenges of the times and really seen how supply chain issues were very much apparent not just for a small sector or one particular group, one particular sector group, but really across the board.
So this strategy is one that I like to say DOD has been involved in industrial strategy we could say for sure for at least a hundred years but honestly it goes back to Hamilton, for those of us who like to think about the historical aspects of it and this strategy is really an opportunity and the first time that the Defense Department in recent years has put pen to paper and outlined a strategic vision for what it is that we need in order to have a modernized, innovative, resilient defense industrial base that can meet the current demands and challenges, but also address the future and pacing threats.
We are, as you – you know, if you had a chance to look at the strategy, it is at once ambitious and also there’s a lot of specificities in there. We have over two dozen specific actions that we outline that will be necessary in order to achieve the four strategic priorities. The four priorities are, one, resilient supply chains; two, workforce readiness; three, flexible acquisition; and four, economic deterrence. The way we looked at is we, over – you know, basically looking at what we have learned over the last several years, trying to mobilize the industrial base, we looked at it and said, all right, what is it that we need in order to really strengthen our supply chains and our defense supply chains? And we came up with, you know, dozens of priorities and really sort of whittled them down and said, what is it that we have heard from industry as well as seen ourselves through our data, through our research, and through constant conversation and dialogue with industry and with our stakeholders, both domestically and internationally? And that’s how we came up with the priorities.
This National Defense Industrial Strategy will guide the department’s engagement, policy development, and investments in the industrial base over the next three to five years. While we say that it will guide us for the next three to five years, we’re also very much talking about having generational change. We understand that there’s a lot that is part of the current state of the industrial base; it’s really decades of policy and business decisions, and we can’t make those changes over one or two years. It’s going to take concerted effort over time. It’s going to take work not just with the Department of Defense but also within the interagency. Just finished an interagency meeting on the implementation of the strategy where there is certainly a lot of enthusiasm for working with us and an understanding of the urgency and of the moment that we’re in and the necessity. But it will also take a lot of work with our industry partners, it will take work with Congress, and certainly with our international partners and allies as well.
So again, the strategy is more than an aspirational document, in our view; it’s really a strategic vision for what we need to meet warfighters’ needs. At the end of the day, that’s what we’re all joining and coming together to do, to meet the needs of the warfighter. I also want to note, off the bat – I know this has come up a lot: How are we going to implement this? Well, we are working on a detailed classified implementation plan that will have near-term measurable actions and metrics. In order to gauge progress in the spirit certainly of transparency and having information that our partners and stakeholders can understand, we will also publish a(n) unclassified overview of the implementation plan. We are currently working on it. We’re, again, continuing the constant dialogue that we’ve had over the last months about the strategy, also on the implementation plan inviting industry groups to come and talk with us, going out and meeting with key stakeholders. So I want to emphasize that because I understand the importance of implementation. You can, you know, write a report that is, you know, many different words. We’ve all done it a number of times. But at the end of the day, it’s going to be very important how it’s implemented. And I want to emphasize that the DOD can’t do it alone. It will need the interagency; it will need our industry partners; it will need our global allies and partners, as well as our people on the Hill.
So the strategy itself is grounded also in the National Defense Strategy. You’ll see it is part of the effort discussed in the National Defense Strategy and the National Security Strategy to revitalize and reenergize U.S. manufacturing and build the kind of ecosystem, industrial ecosystem that we need.
So I will stop there. I’ll just note that, in my view, we can’t afford to wait. We have seen over the last few years the importance of why we need resilient supply chains, the importance not just to us domestically but also for our close allies and partners. We think that the time for action is now, and we’re starting with this strategy, and setting this vision, and wanting everyone to join with us so that we can move forward and implement and, again, meet the needs of war fighters today as well as for the future.
Dr. Cook: Thank you. Thank you for that inspirational overview. Reflecting on it, I appreciate in particular the idea of this as a generational change. It’s so easy to criticize where we are and the gaps and challenges that our industrial base faces today as poor decision making. Actually, every leader makes decisions that are appropriate to her time. And so the decisions that you’re making today have to be appropriate and shape the future. So I view this as rather – you know, we are where we are because of reasonable decisions in the past. We need to make strong decisions now to strengthen the industrial base.
I especially also appreciate how you’ve reflected on the different aspects of the industrial base. It’s really not one initiative or another initiative, but it’s a 360-degree look at everything that makes up a strong industrial base in order to posture it for the future and to support the warfighter. So when I read the strategy I saw threads of the past in it. There’s been efforts for acquisition reform, improve workface force with allies and partners, with supply chains. But this is the first document I’ve seen that really pulls them all together as a strategy, as really understanding the industrial base as a U.S. national capability. As part of deterrence. As really part of our posture in the world.
So thank you. Thank you for putting together such an inspirational document. And with that, I’d like to turn to each of the four threads inside the strategy and ask if you can reflect on them one by one. So the first area is building a more resilient supply chain. The pandemic and then Ukraine uncovered many fault lines in the U.S. defense industrial base, especially in lower-tier suppliers in terms of capacity and, in some cases, capability. Can you expand on supply chain and broader surge capacity challenges that have become apparent in recent years? And how does the NDIS lay out a strategy to help resolve them?
Ms. Taylor-Kale: We could spend all day talking about this. (Laughter.)
Dr. Cook: Well, we have four topics. (Laughs.)
Dr. Taylor-Kale: We won’t, though. We won’t, though.
You know, the – one of the things that’s important to note in reading the strategy is that we are intentionally not being specific about sectors or theaters. It’s sector agnostic, it’s theater agnostic on purpose. We recognize that the strategy needs to be a vision that allows the department to be able to set priorities and work at different levels. The end of the Cold War, the peace dividend, consistent investments in the industrial base decreased over time. We also saw that – you know, again, as you noted, highlighted as a result of COVID pandemic followed on very quickly by Ukraine – we saw that capacity shrank. There are contractors and sectors that have been consolidated, a lot of shortfalls in manufacturing and supply chains.
And, you know, oftentimes people sort of focus on that and sort of quibble about what has changed and why. I think it’s important to say, well, we’re here. So how do we – what is it that we need in order to move forward? What is it that we need in order to be able to really build the industrial ecosystem that we need, that our warfighters need, in order to meet the pacing threats and current challenges? And the purpose of really focusing on resilient supply chains is partly that, you know, understanding that we need the industrial base to be able to securely produce products, services, and technologies that we need. We may need different things at different times in different services. We’ll need different aspects of it. But we need to be able to see all of that and have a vision for all of that.
Undersecretary LaPlante, who I know has been here a number of times, often talks about the need for the department to incentivize industry and send consistent demand signals, talk about the necessity of the industrial base not just as something that’s there, industry as something that’s there, but the industrial base as being part of the deterrence, and that production itself is a deterrent. We understand that part of the challenge is us in the department. We need to be able to provide consistent funding and stable funding in order to give these demand signals. We also – in the strategy you’ll note we have eight different actions that we prioritize as necessities; highlight, you know, the importance of multiyear procurements. Again, that allows us to be able to be – to give industry more consistent demand signals.
I also want to note that there’s a lot of work that we are currently doing and have already been doing. And certainly over the last few years our Defense Production Act and Industrial Base Analysis and Sustainment programs have really increased in amount. So five years or so ago, the Defense Production Act was a 60 (million dollar), $70 million account total. Now we are doing – last year we did almost $900 million in investments based on DPA. And a lot of that is going into critical pain points within the supply chain, so getting, you know, more upstream and being able to invest in critical minerals and strategic materials in order to address some of the supply-chain chokepoints.
So we like to say we don’t – we may not know what kind of batteries we’ll need for what kind of future capabilities, but we know that they’ll probably need lithium. And so the necessity of really investing in, you know, these critical minerals, rare-earth elements, has been important for us over the last few years, and particularly over the last year or so, and we’ll be continuing to do that going forward.
I also want to note that something else that we highlight in the strategy – for those who’ve been, I know, in the room looking at the industrial base for years, we also talk about the importance of the organic industrial base and the necessity for the department to work oftentimes in partnership with industry in order to make sure that there are critical supply chains and also critical capacity is built.
We certainly call for developing more access capacity. Again, you brought resilient supply chains, and I told you we could talk about it all day. But this is very important. The points that we make about excess capacity, I agree with a lot of folks in this room who are probably thinking but that’s going to cost money. You know, the budgetary implications certainly are there. But we – again, the strategy has been to be a vision and outlining what it is that we need and where we need to go, and we have to work together, both the Department of Defense as well as the rest of the interagency, industry and Congress and our international partners, in order to get there.
Dr. Cook: Thank you.
So I’ve been looking at the audience questions. And before we move on to the next thread of the policy itself, I’d like to ask two of the questions from the audience –
Dr. Taylor-Kale: Sure.
Dr. Cook: – that talk about the first aspect of it, which is supply chains. And I’ll give you two questions from the audience on two different sectors.
John Doyle of Seapower Magazine asks specifically about shipbuilding. Building a new factory is one thing, but when it comes to a shipyard, that’s a different challenge. So what can be done to increase or speed up shipbuilding, especially large vessels?
And John Tirpak with Air & Space Forces Magazine asks about the collaborative combat aircraft and how will that be structured to align with the new strategy?
So two very different sectors, two considerations of the industrial base. How does the National Defense Industrial Strategy play a role in ensuring strength of those two sectors?
Dr. Taylor-Kale: Well, thank you for those questions.
So as I noted, we are – we were intentionally sector-agnostic, theater-agnostic, and I should also say systems-agnostic, in the strategy. The whole point was to develop a vision that would be able to guide the department as we make decisions and prioritize.
That being said, we did highlight shipbuilding, right? We highlighted the submarine industrial base, which is something that we have already been investing in through IBAS and other means within the department.
I would say the question about shipbuilding will also be informed by the second priority which is workforce readiness because some of the key challenges that I’ve seen as I’ve, you know, gone to shipyards and met with companies is really around workforce and workforce readiness.
So I will say there’s an aspect of how do we get there that, again, the four strategic priorities are in many ways very much interlinked. You know, one of the ways that – one of the key pain points for some parts of the supply chain is the workforce and so how do we get there is really going to be determined by what – you know, which – what are the key pain points that we have within certain sectors and then working together to solve those in order to reach the overarching vision.
Dr. Cook: Thank you, and that is an excellent segue to my next line of questions, which is on workforce readiness. The NDIS identifies challenges there and offers a strategy to enhance readiness of the industrial base workforce.
Workforce challenges are certainly something I have heard about at beautiful length when I’ve talked to industry. It is a concern across industry, finding and supporting the development of new workers.
So what can the U.S. government and industry do to encourage workers, especially recent high school graduates, to pursue careers in industry like foundries and shipyards? How can the U.S. reach out to bring new talent into the Defense Industrial Base?
Dr. Taylor-Kale: I am so happy that workforce readiness is one of our four strategic priorities. It’s one of the top three areas. When we meet with industry, when they talk to us about some of the key challenges that they face, really is around workforce. And, frankly, it’s the same for us, too.
So workforce is something and labor is something that is a major challenge across the board. I mean, look, we have Baby Boomers retiring in some parts of the country. That means a lot more. So I was just in Maine a few months ago, and you look at low employment rates. You look at an older population, one that’s retiring. We see how much that affects the industry that’s there. We see it in other areas as well.
The fact that younger generations are less interested in pursuing manufacturing careers and industrial careers. We really have to destigmatize that and we talk about that in the strategy, how do we destigmatize.
Interestingly enough I think this is an area where the interagency within the government, so the various government agencies, should be working together more. There are – for us we have done a lot of data-driven – a lot of data analysis around where the needs are particularly for defense.
One of the things that we found is that it’s oftentimes very regional and the workforce is very regional and the workforce challenge is as well. We talk to our friends at the Department of Labor as well. They have certain programs and so what we are now – literally just got off a conversation with the interagency about this.
What we now want to do is take the mapping that we’ve done across the United States to look at the various regions and share that with the Labor Department so that they can see where some of the key choke points are for us within the defense workforce and then be able to see where can we work together with Labor, with Commerce in particular, and then with industry in partnership to address some of these challenges at a more regional level.
I think sometimes it gets really overwhelming and challenging when we think about it from a larger national level. But really there are ways that we need to work on it and address it at a regional level and there are some companies that are – frankly, they’re already doing this and they are really working at it and making strides, working with local governments, working with community colleges, working with high schools.
Some of the work that we honestly need to do is reach students before they get into high school, right, so focusing and marshaling U.S. government resources across the whole of government, as people say, and, again, in partnership with industry will be very important, going forward.
Dr. Cook: I would – I would highlight that the jobs in the industrial base today do require education, do require training, and they are highly technical. They are very good jobs.
I want to highlight a question from an audience member, Robert Warren Painter, who is a retired U.S. Job Corps instructor. He asked specifically about the topic of funding training for the technical and manufacturing skills at the high school level that will be needed to provide the workforce for the defense industry. How are you pulling in resources to this area specifically? Because that is not something that the Department of Defense itself owns. There’s a lot of state and local and industry interests there too.
Dr. Taylor-Kale: Well, first, believe it or not, we are already doing this. (Laughs.) We have, through the Industrial Base Analysis Sustainment Program, working on the National Skills initiative, we have project manufacturing sites across the – across the country. There are things that we are already doing that I don’t think we highlight enough. And more than that, you know, I have my programs within my section. We have, you know, programs within research and engineering. And that’s just in the Department of Defense. Are we, you know, working and leveraging these programs with Department of Labor and other parts of the government is the – is the question. But we have been doing this and we are really building out and advancing on it. And I think over the next few months as we, again, rollout the implementation plan, we’ll also be highlighting some of the new programs and the investments that we’ve been making in this area.
I want to highlight that a lot of these jobs are good jobs. They’re also, again, very mission focused. And as we all think about how is it that we’re going to build the ecosystem that will support the warfighter, that’s actually very motivating for a lot of our young people who are interested in having an impact and being in careers that have an impact. So we need to change the dialogue from stigma, or from, you know, manufacturing or industrial work being dirty, or whatever it is, to one that it’s highly skilled oftentimes, it’s very interesting work, and it’s also very mission focused. And it’s directly affecting the security of the nation.
Dr. Cook: I’d like every kid who loves building Legos to think about a job at the defense industrial base.
Dr. Taylor-Kale: Absolutely. Absolutely.
Dr. Cook: The next – the next area I’d like to turn to in your – in our United States strategy, is flexible acquisition. Improving acquisition processes and making the acquisition system as a whole more flexible and responsive has been an ongoing goal and challenge for the Department of Defense. A challenge which many of us in our – in this room have devoted our careers to trying to help improve. And, again, the NDIS raises the issues of acquisition agility. What is new about the NDIS taking this on? And how does connecting acquisition agility to a deliberate industrial base strategy offer opportunities for change and improvement that we may not have seen in the past?
Dr. Taylor-Kale: I see people in this room who have spent time and sweat working on acquisitions and acquisition reform. I salute you all. It is certainly something that is very important. I will say here, with the National Defense Industrial Strategy, what we’re – we’re not calling for wholesale reform. We’re not saying that there needs to be an overhaul. What we’re saying is that the DOD needs to do a better job of striking a balance. And that balance between what needs to be customized and why, as well as production efficiency and timing.
A couple of areas and actions that we talk about in this strategy really relate to off-the-shelf acquisition, where it’s applicable and reasonable. Again, want to emphasize that. Oftentimes there are off-the-shelf solutions in the commercial arena that can be helpful in driving the kinds of impact and outcomes that we need, and also bring more innovation into the department. But sometimes we make it difficult for ourselves.
The other piece that I think is important to note is that oftentimes we have – we have a lot of authorities. There’s been a lot of work in the acquisition area. And what we probably need to do is use those authorities better, be more attentive to what’s actually needed in the moment. This is going to be a tough one, but I think it’s very important.
The other piece that we talk a lot about within the flexible acquisition area is, you know, the need for more open systems approaches, the Modular Open Systems Approach, again, understanding that – what is the goal? The goal is to, again, meet the needs of warfighters and whether those goals can be met through off-the-shelf products and solutions that are available in the market currently. We need to be able to do a better job of bringing that into the department and where we need to focus more on customization, where it’s necessary to do that. This is part of the reason why the strategy is sector-agnostic, it’s industry-agnostic, it’s weapons-agnostic, systems-agnostic because we understand that there will need to be choices that will have to be made. But the truth is we need to set the priority and have the vision there that this is something that the department needs to do going forward, having that flexibility, and, frankly, ourselves just being much more flexible.
Dr. Cook: So just to riff off a question from Tom Spoehr, a nonresident senior adviser at CSIS: Do you foresee any changes to defense acquisition and contracting regulations to drive the strategy, or are there authorities in place? Do we have what we need already?
Dr. Taylor-Kale: Well, we certainly have some authorities in place, and I think as we were, again, working across the department to develop this strategy, we thought a lot about what is it that we are doing that we should do more of, and where are there authorities that we have that we don’t use enough, particularly, you know, getting to more rapid acquisition. Undersecretary LaPlante oftentimes talks about, you know, the PEOs being some of the most important people for industry. You know, the PEO being more important than, you know, maybe the undersecretary, you know, because of the role that they play in managing the programs. We have to be able to think more, be able to be more flexible. We also probably need to do more education within the department as well. So I think over the next months and over the time, as we develop the implementation plan, we’ll be taking account, what is it that we actually have in terms of our authorities, and thinking better about how do we better use them in order to achieve the priorities? But our thinking was we already have a lot. I mean, if you sit down – probably if you take all the acquisition regulations and stack them up, they’d probably be this high. You know, the question is not necessarily do we need more, but how can we do better with what we have, and then seek to find more authorities or ask for more authorities.
Ms. Cook I 100 percent agree. When I talk to contracting officers they highlight the concern that they can always issue a contract to the lowest-cost bidder and, you know, nobody will complain; they will be able to defend it. The lowest-cost bidder does not necessarily represent the bidder that’s making the greatest investment in resilience, the greatest investments in what is needed to have a strong industrial base for the future. So how can we balance the different requirements and the different interests here? Is that part of the implementation?
Dr. Taylor-Kale: Well, you know, I think part of what we will have to do is I like to think of us as part of a relay team, and, you know, we have the development, research and development being the first leg, and then I’m sort of the, you know, the second leg, sticking out my arm in the back, trying to pick up the baton from the research and engineering side and bring it forward, and then we’re taking the baton over to the acquisitions folks. You know, one of the things that I think we will need to do and we have been doing and working better at is how do we move from the investments and the interventions that we make with the Defense Production Act and IBAS and draw that along so that, you know, companies and products become part of programs and records. So I think there will be a need for better work into coordination and linkages across the department, and even, frankly, within A&S in order to achieve that.
Dr. Cook: So work is needed in that area.
Dr. Taylor-Kale: There’s always room for improvement.
Dr. Cook: Yes. OK, so we’ve covered three of the four initiatives. Let’s turn to the fourth, which is economic deterrence. And I do see a number of allies and partners in the room, so welcome. Thank you for coming today.
The NDIS advocates for building ally and partner relationships in the acquisition ecosystems as a means of economic deterrence. How can the U.S. prioritize and grow these relationships? And how can we better integrate our acquisition systems and our acquisition programs with allies and partners?
Dr. Taylor-Kale: Frankly, our work with global partners and allies and the lessons that we’ve learned from them have been an important part in informing the development of the strategy. We have spent the last two-plus years working with the national armaments directors in order to supply more capabilities to Ukraine and others. You know, the important pieces of the economic deterrence and working with our global partners and allies will be about certainly using the authorities that we have, like CFIUS and also economic security agreements, and really taking them forward.
I’ll say we’ve already been doing a lot of this work. Particularly over the last year, we signed within A&S seven more security supply agreements. We have, again, with Undersecretary LaPlante being the national armaments director, really focused on the importance of production as a deterrent, and also how to, you know, concretely work with our global partners and allies. We’re also thinking about what is it – what does a pacing scenario look like, and how do we need to work with global partners and allies there.
AUKUS is another area where we’ve been very actively engaged within A&S. I also highlight people don’t realize, in the NDAA that was recently passed, we were able to expand the DPA authority, so now Australia and the U.K. are considered domestic sources. This is actually really important. This will be something that will allow us to work, again, on securing more resilience in the supply chains, but again, also working more collaboratively with our partners and allies.
So I think there’s a lot of possibility here. And there’s certainly a necessity, based on what we’ve seen over the last several years.
Dr. Cook: OK. There’s not as many questions on allies and partners. So let me lead with one –
Dr. Taylor-Kale: You can make some up.
Dr. Cook: OK.
Dr. Taylor-Kale: (Laughs.)
Dr. Cook: Oh, I have some more at the end, so don’t worry. We have plenty to talk about. But Craig Mallory from the Defense Acquisition University asks about design for exportability and the role that would – that plays in the strategy, especially since, as he highlights, and as I’ve heard from others, that it’s required by acquisition policy but it’s often under-resourced. And in an acquisition program, sometimes when there are resource constraints, that is something that has to give way to reprogram those resources for other needs.
Dr. Taylor-Kale: Yeah, I think this really underscores one of the key things that we’ve learned over the last few years, especially from Ukraine and our work with the national armaments directors and work in supporting our allies and partners overseas, is the importance of interoperability and interchangeability.
You know, it’s more than just – you know, part of the question is about exportability. It’s more than just what do you do once a product is done. It’s how do you think about interoperability and operationalize it well early into the acquisition process? This is something that we’re highlighting and we think is important.
Again, having the strategy outline as a vision that it’s important for us to work with our global partners and allies. In order to meet warfighters’ needs for pacing threats, we are going to need to focus on interoperability and interchangeability. That’s an important step, I think, for the Department of Defense.
Dr. Cook: Ok.
Dr. Taylor-Kale: And it’ll be important for, again, as we continue to develop security supply agreements, as we continue to work with the armaments directors, as we continue to think about the Indo-Pacific theater, we continue to work with AUKUS, I think these will all be important pieces.
Dr. Cook: Thanks. That’s a good reflection.
Another question about economic deterrence is more risk focused. This is from a member of the National Nuclear Security Administration. What are your thoughts on the weaponization of the supply chain by China, undercutting industry with low prices to drive others out of business and using price and export controls as a weapon to limit and restrict the U.S. and other – our allies/their adversaries? What can be done by the U.S. and its allies in response?
Dr. Taylor-Kale: It’s in part and parcel of our deep concern about this, and also the work that we’ve been doing over the last few years to address this with Defense Production Act investments and rare earth elements, critical materials, and critical minerals. Part of this is part of the reason why economic deterrence is one of the four strategic priorities. We talk about and highlight adversarial capital coming into the industrial base and really destabilizing and creating challenges as well. This is an area that you’ll see us continue to work on. It’s more than just CFIUS. It’s about, what can we do before things come into the CFIUS stage? How can we better use our tools and authorities?
One of the things I like to note for folks is that we have the Defense Production Act, but we really only use about a quarter of it. We have the ability to do loans and loan guarantees. We also have ability to do supply agreements, purchase commitments, and also work on adversarial capital as part of it. So some of the themes that I’ve been talking about here are starting to link together, which is there’s an aspect of we don’t use our tools and authorities enough, or we underutilize them. And I think going forward that’s going to be very important for the Department of Defense in being able to be a leader, and to really step forward and implement economic deterrence in a way that will strengthen the industrial base and build the ecosystem that we need.
Dr. Cook: I think the strategy as a whole gives decisionmakers at every level something to point to, to explain why they’re making decisions and why they’re trying to use authorities. So I think that is where this is so powerful and such a contribution.
Dr. Taylor-Kale: I’ll also note that we have elevated the Office of Global investment and economic security, which is part of my team, as a direct report to me. Again, really focusing on how do we address adversarial capital. And we’re also planning to do it with some key international partners and allies. We’re having conversations with NATO and with others about how we can work together on some of the common challenges that we all have around adversarial capital and incursions of predatory investments and adversaries in the supply chains.
Dr. Cook: Thank you. OK, so the – so we’ve covered the overview.
Dr. Taylor-Kale: We’ve covered the overview.
Dr. Cook: We’ve covered the four areas of interest. And now we get to the hard part, which is ensuring implementation and change. Instantiating the NDIS into the – into the broader ecosystem – I don’t want to call it the acquisition ecosystem. It is a broader ecosystem. And sustaining it over time, especially across administrations over the next 10-20 years, is not going to be easy. Can you talk about the plans for implementation? And what can we see over the next one, three, five years as you work to manage this change?
Dr. Taylor-Kale: Sure. I will highlight that I was confirmed bipartisan. The issues around the defense industrial base are ones that Republicans and Democrats care about. I reach out to and talk to both sides of Congress, you know, both the minority and the majority, and also reach out not just to the Armed Services Committees but also to Finance and Banking, because they’re our authorizers on the Defense Production Act. Also Commerce, and Natural Resources, and Foreign Relations. It’s important to really understand that defense industrial policy and, frankly, I’ll say industrial policy in general, really crosses a lot of lines.
And so I am optimistic that, you know, we can all continue to work together, especially if we focus on sort of the key priority and the goals of focusing on supporting the needs of war fighters. As I noted at the top, we are working on an implementation plan, a classified implementation plan, that will have detailed metrics and goals. And that will be ready in March. And we plan to publish an unclassified overview of the implementation plan in February.
So we recognize the importance of implementation. That is what we’ve been talking about internally now for a while. We also understand and recognize the importance of working – continuing to work closely with industry partners in order to get there. So it’s – again, it’s not a DOD-only solution. It’s not a partisan solution or issue. It’s one that we all really need to work together on.
Dr. Cook: OK. We have a number of questions on implementation, so I’ll pick two. Jerry McGinn from George Mason asked about implementation. And understanding that a lot of the components will be classified, can you just talk about sort of the broad thrusts and priorities of the implementation plan?
Dr. Taylor-Kale: Sure. Well, I’ll tell you some of the things that we’ll be talking about, particularly in the unclassified area. It goes back to my earlier comment about, you know, batteries and we don’t – we may not know what kind of batteries we need, but we know we’ll need lithium. You know, critical minerals and strategic materials will be – continue to be very important. The, I think, FY ’23 NDAA wrote into law that the assistant secretary for industrial base policy, so me and my successor, lets us stand up a board of directors for the national defense stockpile. It is, to me, absolutely important that we move forward with this.
We highlight in the strategy the importance of building, you know, excess capacity, but also our stockpiling. It’s an area that, again, we are talking about working with global partners and allies. So the – you know, the general thrust around critical minerals and strategic materials I think will be something that will be part of the implementation going forward in a certain area. I’ve already – you know, in the strategy we’ve highlighted the importance of adversarial capital and the effects that it has on the industrial base, particularly predatory investments and acquisition practices. It’s something that we want to continue moving forward to address as well. So we’re thinking about the implementation from many different standpoints but, again, focusing on what are the – ultimately, what are the needs of war fighters and how do we address sort of the key choke points and pain points in the supply chain to get there?
Dr. Cook: I’m inspired by what you say. But as you speak, you also highlight the many risks that the industrial base faces. And thus, I think it’s worthwhile to highlight a question from Dave Berteau with the Professional Services Council, who’s here with us today. He notes that this strategy implies the need for more investments, but current and planned defense budgets are flat in real dollar terms. Does implementation require more investment? If so, how can a flat budget profile provide increased financial returns?
Ms. Taylor-Kale Firstly, I want to say I think that, you know, we continue to support the president’s budget request for FY ’24. The importance of the budgets for the defense industrial base really gets back to some of the things we talked about earlier, the need for consistent demand signals. And certainly, an environment where there’s continuing resolutions don’t help. You know, we much support and hope that we’ll have a defense spending bill soon. That’s going to go a long way. For an environment where we’re in continuing resolutions, that will make it more difficult.
The strategy does not make a specific number of requests. And that’s important. Again, we wanted to provide a strategic vision and, again, being industry agnostic, sector agnostic, that can really help as we prioritize and think about what it is that we need going forward. So there will be, you know, continued review and conversations, and looking at what is it that are some of the priorities and necessities across the Department of Defense in order to move this forward, in order to implement?
Dr. Cook: So this is a vision. You know you’ll need resources. You’ll work those out.
Dr. Taylor-Kale: Mmm hmm. We’ll always need resources.
Dr. Cook: But the one thing you can say today is confidence in the budgets versus the churn of continuing resolutions would be enormously helpful, and I think we can probably all agree on that in this room. So thank you.
We are – we are running out of time. I have one last question, but before I get to my closer I want to highlight a question from Blanton Newman, who is a U.S. Senate staffer. Oh, by the way, I will – there’s many more questions than we have time for, but I will share them with Dr. Taylor-Kale at the end of this so she sees what everybody says. But Mr. Newman notes that the consolidation in the defense sector since the 1990s has had an impact on the structure of the industrial base. For example, 90 percent of missiles come from roughly three sources. So can you talk a bit about the consolidation in the industrial base, the risks that it might represent, and whether there should be a push for more diversification of acquisition programs across different providers to change that?
Dr. Taylor-Kale: So what we are aiming to do with this strategy is provide a vision for, you know, the traditional defense industrial base companies that have been involved in the Defense Department, working in the Defense Department for years, but also invite nontraditional companies to work with us. I know that’s challenging. We know that it’s not easy always to work with the Department of Defense. You all – many of you in the audience tell me that regularly. I think it is going to be important for us to begin, as we think about the future threats and scenarios, to focus on how do we build and expand and be more creative and more flexible in building out the industrial ecosystem.
So, you know, we’ve talked a lot about consolidation in the past. We talk about sort of the conditions that brought us here. But I really think it’s important for us to focus in looking forward in what is it that we need, what is it that our warfighters need, and how do we get there. And I think, you know, again, shoring up our supply chains, building out the ecosystem, and bringing in nontraditional actors who, again, have new capabilities, services that can be helpful for the Department of Defense and for the industrial base and for different parts of the supply chain, I think that will be really important.
Dr. Cook: OK. Thank you.
So that is, once again, a terrific seg to my next and in this case final question, which is, I represent a think tank. I see others from the think-tank sector, the research sector in the room. What kind of research can we engage in that would usefully contribute to the efforts of the industrial base policy as you – as you work to improve and strengthen the industrial base?
Dr. Taylor-Kale: Well, I will start out by saying that I think there’s – there have been researchers and think tanks and in research institutions, academia for years who have been talking about the defense industrial base, you know, industry in general, and I salute you all. I think the fact that, you know, three to five years ago people woke up to some of the challenges of supply chains, and then they looked back and realized that you all have been – (laughter) – have been researching and writing about that is important. So certainly, you know, setting the stage and helping us all to understand what the challenges are, also what the opportunities are and where they are, I think will continue to be important.
You know, and as – and government, it’s part of our job to, of course, you know, assess, but also to implement and to execute. And sometimes you need the folks who are, you know, in think tanks to really be able to do that in-depth work and research and reporting. So, one, providing that information looking at areas where, you know, maybe there are blind spots. Looking at new innovative technologies I think will continue to be important. And getting that information to the folks in government and leadership will be very important for us.
So, again, I salute the work that you all have been doing here at CSIS and other think tanks and research institutions.
Dr. Cook: Well, thank you very much. I appreciate this.
Any final closing remarks for us?
Dr. Taylor-Kale: As I’ve noted before, the Department of Defense can’t do this alone. I think, again, I see a lot of familiar faces in this audience, and probably many more online. I thank you all for your support, and for your feedback, and for your continued partnership. Thank you.
Dr. Cook: Thank you. (Applause.)
(END.)
