It is only a matter of time before industrial suppliers loose investor support grow weary of budget cuts. Resolving this gap with defense industrial policy will give a safeguard to the industrial base by providing industrial suppliers the necessary reassurance for their stakeholders. At the very least, suppliers require guidance to re-orient resources as priorities shift and programs are cut. It is yet to be seen if this present pattern of business will insure a suitable industrial base in the future without addressing this issue.
A case in point, SecDef Hagels recently declared six priorities for the Defense department include maintaining a lead in emerging technologies, such as: space, cyber, special operations forces, intelligence, surveillance and reconnaissance without pointing to any industrial guidance to achieve these requirements. This leaves industrial suppliers gambling over which programs to invest resources without the risk of being cut. For instance, Space programs such as: GPS Positioning ($1.3 Billion) and Planned purchase of extremely high frequency satellite programs ($652.5 million) do not have any order of preference from the department. From the defense supplier’s point of view, without any preferences, allocating resources and investing in technology is problematic. As publicly traded companies, defense suppliers are bound to stakeholders, and must proceed with caution for projects at risk of being cut. The lack of guidance only adds to their challenge of keeping stakeholders satisfied.
Additionally, without clear guidance, industrial suppliers will find it difficult to undertake research and development for maintaining the lead alluded to in SecDef Hagel’s priorities. The need for more research and development is greater than ever as the US shifts its strategic focus. Existing platforms and sensors used in Iraq/Afghanistan must be modified to support the department’s strategic pacific pivot. In better fiscal times, research and development programs are considered worth pursuing because of their potential returns on investment. However, with out guidance, industrial suppliers are forced to move cautiously supporting research and development given the risk of programs loosing out to sequestration. It is even unclear if today’s research and development programs themselves will survive anticipated annual $50+ billion dollar cuts over the next decade. The absence of asurity in research and development programs makes it difficult for industrial suppliers to make a case to stakeholders support to undertake these type of efforts.
Despite ample opportunities, the ability for the department to produce the necessary industrial guidance remains elusive. In response to sequestration, the department’s focused on dealing with cuts rather than addressing impacts to the industrial base. Unfortunately, the department continues to miss opportunities for releasing visible guidance and fill this present void. Recent policy...