Department of Defense:

A Departmentwide Framework to Identify and Report Gaps in the Defense Supplier Base Is Needed

GAO-09-5: Published: Oct 7, 2008. Publicly Released: Oct 7, 2008.

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The Department of Defense (DOD) relies on thousands of suppliers to provide weapons, equipment, and raw materials to meet U.S. national security objectives. Yet, increased globalization in the defense industry and consolidation of the defense supplier base into a few prime contractors has reduced competition and single-source suppliers have become more common for components and subsystems. For this report, GAO (1) assessed DOD's efforts to monitor the health of its defense supplier base, and (2) determined how DOD identifies and addresses gaps that might exist in its supplier base. To conduct its work, GAO reviewed supplier-base-related laws, regulations, and guidelines; met with officials from DOD's Office of Industrial Policy, defense contractors, and other DOD officials; and surveyed 20 major DOD weapon acquisition program officials on potential supplier-base gaps.

DOD's efforts to monitor its supplier base lack a departmentwide framework and consistent approach. Its monitoring efforts generally respond to individual program supplier-base concerns or are broader assessments of selected sectors. As part of its supplier-base monitoring efforts, DOD has also previously identified lists of critical items--which according to DOD's Office of Industrial Policy (Industrial Policy) do not reflect the dynamic changes that occur in industry, technology, and DOD requirements. While DOD recently established criteria for identifying supplier-base characteristics that could be problem indicators--such as sole-source suppliers and obsolete or emerging technologies--these criteria have primarily been applied to the missile and space sectors and have not been used to guide the identification and monitoring of supplier-base concerns for all sectors departmentwide. DOD uses an informal approach to identify supplier-base concerns, often relying on the military services, program offices, or prime contractors to identify and report these concerns, including gaps or potential gaps. As no requirement for when to report such gaps to higher-level offices exist, knowledge of defense supplier-base gaps across DOD may be limited. While 16 of the 20 program officials GAO surveyed reported that they identified supplier gaps or potential gaps over the past 5 years, only 4 reported sharing this information with Industrial Policy. These gaps included obsolescence of components and items with only one available supplier. Program offices often relied on the prime contractor to identify and help address supplier-base gaps, and prime contractors and programs generally used their discretion as to when to report gaps to higher levels. As a result, Industrial Policy may not be receiving information to help it activate available tools, such as the authorities under the Defense Production Act, to mitigate supplier-base gaps.

Status Legend:

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  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: The Secretary of Defense should direct Industrial Policy, in coordination with the military services and other relevant DOD components to identify and monitor the supplier base to leverage existing DOD efforts to identify criteria of supplier-base problems and fully apply these criteria to guide the identification and monitoring of supplier-base concerns throughout DOD.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: DOD believes there is merit in having formal, published criteria for making judgments regarding suppliers and components that are important to DOD. DOD has included these criteria in the July 2009 update to the Defense Acquisition Guidebook.

    Recommendation: The Secretary of Defense should direct Industrial Policy, in coordination with the military services and other relevant DOD components to identify and monitor the supplier base to create and disseminate DOD-wide written requirements for reporting potential concerns about supplier-base gaps. These requirements should delineate when, and to what level, supplier-base concerns should be elevated and should take into account the two levels of reporting--prime contractors to program offices and program offices to higher levels in DOD.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: DOD believes there is merit in having formal, published criteria for making judgments when program offices should report/elevate supplier issues to DUSD (IP). DUSD (IP) submitted new language which is included in the July 2009 Defense Acquisition Guidebook that would meet the requirement of when, and to what level program offices should elevate supplier base concerns. The guidance will encourage program offices and the Services to continue to resolve identified industrial capability issues at the lowest level. However, in cases when issues may impact more than a single program of Service, or when an industrial capability matter meets certain criteria, the proposed language would instruct the program office to elevate the matter via their Program Executive Officer to DUSD (IP).

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