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Update on Industrial Base Concerns/Issues Presented to ICAP 12 February 2002

Update on Industrial Base Concerns/Issues Presented to ICAP 12 February 2002. Alan R. Beuster Chief, Industrial Base Assessment Division AMSOS-PBI (309) 782-2434 E-mail beustera@osc.army.mil. What is the Ammunition Industrial Base?. 1991 2001 Government-owned Facilities 28 13

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Update on Industrial Base Concerns/Issues Presented to ICAP 12 February 2002

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  1. Update on Industrial BaseConcerns/IssuesPresented toICAP12 February 2002 Alan R. Beuster Chief, Industrial Base Assessment Division AMSOS-PBI (309) 782-2434 E-mail beustera@osc.army.mil

  2. What is the Ammunition Industrial Base? 19912001 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

  3. Purpose of Production Base 1st MTW 2nd MTW 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

  4. BREAKOUT BY SERVICE 15 Unique to AIR FORCE 45 Unique to NAVY 11 Unique to MARINE CORP 36 Unique to ARMY 64 Common to Multiple Services 171 TOTAL ITEMS Supports all Services ARMY 21% AF 9% MC 6% COMMON 38% NAVY 26%

  5. 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 base…yet 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 and…others at high risk • Surge capability virtually non-existent…can 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

  6. 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 MTW’s • Push to divest of the organic base • Focus on price versus price and readiness

  7. 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

  8. 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 …..

  9. Throughout The Army Transformation Transformation must include a holistic munitions strategy.

  10. 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.

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