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Defense budget short on modernization. (Government Policy Notes).

President Bush's proposed defense budget of $379 billion for fiscal year 2003 represents a dramatic increase over current spending, but it is insufficient for the task at hand, NDIA President Lawrence P. Farrell testified at a mid-March congressional hearing.

The request "sounds large," Farrell told the House Armed Services Military Procurement Subcommittee. "But when compared with the needs-homeland security emergency requirements, past unpaid bills, increased ops temp-only about $10 billion is available for new requirements or increased procurements. And that is not enough."

The services have "a lot of tired iron"-old vehicles, ships and aircraft--and that affects how they perform in combat, said Farrell, a retired Air Force lieutenant general. "War and conflict are come-as-you-are events. The trained troops and the weapons systems employed are the products of previous investments," he explained. "Whether the troops and weapons are up to the task or woefully unprepared depends on the level and commitment over time to defense spending."

Whether the defense industrial base is healthy or not "depends on the same two factors-level and consistency of commitment over time," Farrell said. Although the U.S. defense industry is "second to none," Farrell said, its health "is threatened by smaller production runs, fewer new starts and increasing international competition."

Also, he said, a number of acquisition laws, regulations and procedures have forced many companies from the market, leaving the industrial base, as a whole, smaller and less diverse.

Furthermore, Farrell said, episodic funding and inadequate profit margins have resulted in a large number of single-source suppliers who have, in some cases, marginal capability to perform their industrial function. Many types of ammunition, for example, are only available from single sources, and a significant number of these are foreign, Farrell noted.

A healthy industrial base requires skills and personnel to cover the needs of science and technology, development, program management and production engineering, Farrell said.

Many of industry's problems are a result of bureaucratic barriers deterring companies from doing business with the federal government, Farrell said. As an example, he cited the need for increased contract flexibility in the procurement of commercial products and services.

"We also advocate more competitive sourcing," Farrell said. "The resulting increased outsourcing will make [the Defense Department] more efficient, as well as a more commercially oriented buyer. Increased outsourcing also provides more financial robustness to the industrial base." Industry, he said, "stands opposed to any barrier that would artificially constrain, limit or halt the process of competitive sourcing."

Farrell's complete statement is available at by clicking on "advocacy," "resources" and "testimony"

Speeding Up Industrial Response

During the war on terrorism, a number of federal departments and agencies are turning to the Commerce Department's Defense Priorities and Allocations System to meet war-fighting and homeland-security requirements, said the system's program manager, Richard V Meyers.

DPAS works to make sure that industrial resources needed to meet approved national defense and emergency preparedness program requirements are available on time, Meyers told an annual seminar conducted by NDIA's Procurement Committee, held in March in Sr. Petersburg, Fla. "It also provides an operating system to support rapid industrial response in a national emergency," he said.

Currently, Meyers said, DPAS is supporting Operation Enduring Freedom in Afghanistan and a number of anti-terrorist programs run by the Departments of State, Justice and Transportation, he said.

The seminar is a one-day event designed to provide broad coverage and analysis of timely acquisition-related and industrial security issues. This year's seminar included briefings on wartime procurement laws and security challenges caused by foreign customers visiting U.S. defense industry facilities.

International Trade Reform

One of NDIA's Top Issues for 2002 calls for the need to reform international trade processes, placing priority on safeguarding national security while balancing the competitive and economic needs of the U.S. defense technology and industrial base.

In February, NDIA President Lawrence P. Farrell--along with his AIA and EIA counterparts, as well as 39 CEOs-wrote to President Bush to say: "Continued emphasis by the Administration on fundamentally reforming the [export controls] system is critical ... to ensure that it reflects both current global market realities and America's strategic policy imperatives."

Also in February, Farrell testified before the Commission on the Future of the U.S. Aerospace Industry, citing the steps that need to be taken to ensure this reform.

Such steps, he said, include reviewing and removing items from the U.S. Munitions List which, though deemed to be critical technologies, are available on the mass-market or from foreign competitors and eliminating bureaucratic barriers that impede the export licensing process.

NDIA, as a member of the Export Controls Working Group, is closely following reauthorization of the Export Administration Act, which governs the export of dual-use items.

NDIA has endorsed the Senate version of the bill that passed last year. This bill has strong bipartisan support, as well as endorsement from the administration. However, a companion bill currently awaiting House floor action would result in much tighter controls on these items, which both the administration and industry oppose.

NDIA Government Policy

Steve Thompson

Vice President, Government Policy

Ruth W. Franklin

Director, Procurement

Jennifer Burnside

Director, International

Ben Stone

Government Policy Analyst

Jim Linden

Staff Assistant, Government Policy
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Author:Thompson, Steve
Publication:National Defense
Article Type:Brief Article
Geographic Code:1USA
Date:May 1, 2002
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