Defense Drawdown & Defense Industrial Base

This paper will discuss proposals to sustain the U.S. defense industrial base during the defense drawdown. Opponents of this idea claim that the defense acquisition budget has a negative impact on the economy of the nation as a whole. The proponents, on the other hand, point out that it is important to continually sustain defense capability. In order to maintain a deterrence against outside aggression, the U.S. military must not only be prepared for action at any time, but must also be equipped with the latest technological innovations. It is only by maintaining its defense assets that the U.S. can continue to have the capability to protect its interests in the world (Blair 71).

The U.S. defense industry is unique because the government controls not only who gets contracts, but also the way in which the contracts are carried out. The government is a monopsonistic customer of the defense industry. In other words, the government is the industry's only customer, and the products (weapons systems) are made specificially to meet the government's ever-changing needs. This situation has resulted in many problems for the U.S. defense industry base. For example, extreme government regulations make the industry unprofitable for most small contractors. Other economic problems for defense firms include high overhead due to administrative and technical costs, and high financial risk due to the instabilities and uncertainties of the nation's defense needs. Furthermore, the defe

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despite its high financial risks; (3) the DOD must change its acquisition approach so that it encourages greater industry stability, more competition, and increased cost consciousness; and (4) the DOD must make an effort to improve R&D and production effectiveness within the nation's defense industrial base (Gansler 269-270). All of these changes would contribute greatly to restoring the vitality of the nation's defense industry. One of the most serious difficulties faced by the U.S. defense industry is that of foreign competition. This can be seen, for example, in the domestic machine tools industry, which is responsible for providing many important pieces of equipment in weapons manufacturing. In 1983, the National Machine Tools Builders Association (NMTBA) petitioned the Department of Commerce because of its difficulties in competiting with foreign firms. In response, President Reagan requested VRAs (Voluntary Restraint Agreements) from the nation's three main competitors: Taiwan, Japan, West Germany and Switzerland. In addition, the President ordered an action plan for the machine tools industry which called for greater coordination between the DOD and the industry, as well as increased DOD sponsorship of R&D within th

Category: Government - D