[House Hearing, 119 Congress]
[From the U.S. Government Publishing Office]
SECURING THE SUPPLY CHAIN: THE DEFENSE
PRODUCTION ACT IN FOCUS
=======================================================================
FIELD HEARING
before the
SUBCOMMITTEE ON NATIONAL SECURITY, ILLICIT
FINANCE, AND INTERNATIONAL
FINANCIAL INSTITUTIONS
of the
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED NINETEENTH CONGRESS
FIRST SESSION
__________
AUGUST 13, 2025
__________
Serial No. 119-36
Printed for the use of the Committee on Financial Services
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
www.govinfo.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
61-503 PDF WASHINGTON : 2026
HOUSE COMMITTEE ON FINANCIAL SERVICES
FRENCH HILL, Arkansas, Chairman
BILL HUIZENGA, Michigan, Vice MAXINE WATERS, California, Ranking
Chairman Member
FRANK D. LUCAS, Oklahoma SYLVIA R. GARCIA, Texas, Vice
PETE SESSIONS, Texas Ranking Member
ANN WAGNER, Missouri NYDIA M. VELAZQUEZ, New York
ANDY BARR, Kentucky BRAD SHERMAN, California
ROGER WILLIAMS, Texas GREGORY W. MEEKS, New York
TOM EMMER, Minnesota DAVID SCOTT, Georgia
BARRY LOUDERMILK, Georgia STEPHEN F. LYNCH, Massachusetts
WARREN DAVIDSON, Ohio AL GREEN, Texas
JOHN W. ROSE, Tennessee EMANUEL CLEAVER, Missouri
BRYAN STEIL, Wisconsin JAMES A. HIMES, Connecticut
WILLIAM R. TIMMONS, IV, South BILL FOSTER, Illinois
Carolina JOYCE BEATTY, Ohio
MARLIN STUTZMAN, Indiana JUAN VARGAS, California
RALPH NORMAN, South Carolina JOSH GOTTHEIMER, New Jersey
DANIEL MEUSER, Pennsylvania VICENTE GONZALEZ, Texas
YOUNG KIM, California SEAN CASTEN, Illinois
BYRON DONALDS, Florida AYANNA PRESSLEY, Massachusetts
ANDREW R. GARBARINO, New York RASHIDA TLAIB, Michigan
SCOTT FITZGERALD, Wisconsin RITCHIE TORRES, New York
MIKE FLOOD, Nebraska NIKEMA WILLIAMS, Georgia
MICHAEL LAWLER, New York BRITTANY PETTERSEN, Colorado
MONICA DE LA CRUZ, Texas CLEO FIELDS, Louisiana
ANDREW OGLES, Tennessee JANELLE BYNUM, Oregon
ZACHARY NUNN, Iowa SAM LICCARDO, California
LISA McCLAIN, Michigan
MARIA SALAZAR, Florida
TROY DOWNING, Montana
MIKE HARIDOPOLOS, Florida
TIM MOORE, North Carolina
Ben Johnson, Staff Director
------
SUBCOMMITTEE ON NATIONAL SECURITY, ILLICIT FINANCE, AND INTERNATIONAL
FINANCIAL INSTITUTIONS
WARREN DAVIDSON, Ohio, Chairman
ZACHARY NUNN, Iowa, Vice Chairman JOYCE BEATTY, Ohio, Ranking Member
FRANK D. LUCAS, Oklahoma JOSH GOTTHEIMER, New Jersey
PETE SESSIONS, Texas JUAN VARGAS, California
ANDY BARR, Kentucky BILL FOSTER, Illinois
ROGER WILLIAMS, Texas VICENTE GONZALEZ, Texas
YOUNG KIM, California RITCHIE TORRES, New York
ANDREW OGLES, Tennessee SEAN CASTEN, Illinois
LISA McCLAIN, Michigan SAM LICCARDO, California
MARIA SALAZAR, Florida
C O N T E N T S
----------
Wednesday, August 13, 2025
OPENING STATEMENTS
Page
Hon. Warren Davidson, Chairman of the Subcommittee on National
Security, Illicit Finance and International Financial
Institutions, a U.S. Representative from Ohio.................. 1
STATEMENTS
Hon. French Hill, Chairman of the Committee on Financial
Services, a U.S. Representative from Arkansas.................. 2
WITNESSES
PANEL ONE
Mr. Jeffrey W. Frankston, Acting Deputy Assistant Secretary of
Defense for Industrial Base Resilience, Office of Assistant
Secretary of Defense for Industrial Base Policy, Department Of
Defense (DOD).................................................. 3
Prepared Statement........................................... 6
Dr. Charles D. Ormsby, Acting Director, Materials and
Manufacturing Directorate, Air Force Research Laboratory,
Wright-Pattterson Air Force Base............................... 9
Prepared Statement........................................... 11
PANEL TWO
Mr. Robert Faxon, Chairman of the Board, Consolidated Boring Inc. 27
Prepared Statement........................................... 30
Mr. Gordon Follin, Chief Product Officer, Beehive Industries..... 34
Prepared Statement........................................... 36
APPENDIX
MATERIALS SUBMITTED FOR THE RECORD
President Trump's Critical Minerals Executive Order.............. 56
SECURING THE SUPPLY CHAIN: THE DEFENSE
PRODUCTION ACT IN FOCUS
----------
Wednesday, August 13, 2025
U.S. House of Representatives,
Subcommittee on National Security, Illicit Finance,
and International Financial Institutions,
Committee on Financial Services,
Washington, DC.
The subcommittee met, pursuant to notice, at 9:59 a.m., at
the National Museum of the Air Force, Wright-Patterson Air
Force Base, 1100 Spaatz Street, Dayton, Ohio 45433, Hon. Warren
Davidson [chairman of the subcommittee] presiding.
Present: Representatives Davidson, Hill, Huizenga, and
Moore.
Chairman Davidson. The Subcommittee on National Security,
Illicit Finance, and International Finance Institutions will
come to order.
Without objection, the chairman is authorized to declare a
recess of the committee at any time.
Today's hearing is titled, ``Securing the Supply Chain: The
Defense Production Act in Focus.''
Without objection, all members will have 5 legislative days
within which to submit extraneous materials for inclusion in
the record.
I now recognize myself for 4 minutes for an opening
statement.
OPENING STATEMENT OF HON. WARREN DAVIDSON, CHAIRMAN OF THE
SUBCOMMITTEE ON NATIONAL SECURITY, ILLICIT FINANCE AND
INTERNATIONAL FINANCIAL INSTITUTIONS, A U.S. REPRESENTATIVE
FROM OHIO
Good morning, and welcome to today's National Security
Subcommittee hearing, ``Securing the Supply Chain: The Defense
Production Act in Focus,'' which is devoted to evaluating the
Defense Production Act ahead of its expiration in September.
This year, this subcommittee has had a June hearing and a July
briefing that provided a fundamental overview of DPA for
Members of Congress. We convene here today at Wright-Patterson
Air Force Base because of its significance in implementing
DPA's Title III through Wright-Patt's hosting of Major Air
Force commands involved in defense acquisition. This ensures
that Title III-funded capabilities are integrated into
operational systems, affects the base's sustainment activities,
and enhances its ability to address national industrial base
vulnerabilities.
My colleagues and I are grateful for the opportunity to
address the critical role of Wright-Patterson Air Force Base in
executing DPA's Title III authorities and the urgent need to
modernize and enhance these powers to strengthen our national
security. We will feature two panels, the first offering
military officials' perspective on the current DPA
functionality, and the second panel incorporating feedback from
civilian defense contractors from our region on today's
procurement landscape.
Enacted in 1950 during the Korean War, the Department of
Defense (DPA) was designed to secure America's industrial base
for national emergencies, prioritizing domestic production over
foreign reliance. Today, as our dependence on foreign critical
materials--semiconductors, rare earth minerals,
pharmaceuticals--grows, the DPA's importance is undeniable.
However, from 2018 to 2024, there has been a significant change
in the pace of some of the Title III activity. The coronavirus
disease 2019 (COVID-19) pandemic exposed a reactive posture,
proving that waiting for a crisis results in a delayed response
and not always well thought out. Modernizing DPA demands a
proactive approach to bolster domestic capabilities.
Wright-Patt is central to addressing these challenges.
Through the Air Force Research Lab's Executive Agent Program
Office, Wright-Patt manages Title III projects to expand
manufacturing capacity for advanced materials, but also for
older technologies. Nevertheless, limitations persist.
Streamlining the DPA process could enable faster agreements and
expand flexible contracting. Increasing funding flexibility
would allow Wright-Patt to prioritize emerging technologies as
well as improving existing supply chains. Reauthorizing DPA
offers a chance to reset and realign its authorities with
today's threats. By enhancing Wright-Patt's role through
simplified procurement, expanded funding, and proactive
collaboration, we can rebuild a more resilient industrial base.
I urge this committee to reconsider the Defense Production Act
and the opportunity we have before us to modernize it.
I will now yield my time, and I will recognize the chairman
of the full committee, French Hill, for 1 minute.
STATMENT OF HON. FRENCH HILL, CHAIRMAN OF THE COMMITTEE ON
FINANCIAL SERVICES, A U.S. REPRESENTATIVE FROM ARKANSAS
Chairman Hill. Thank you, Mr. Chairman. It is great to be
here in your home State of Ohio and here at Wright-Patterson
with our colleagues.
America is navigating one of the most dangerous and complex
global threat environments in recent history. Our adversaries
are accelerating innovation, scaling production, and heavily
investing in their national defense capabilities. It is
critical that America keeps pace and expands our dominance as
the leader in the free world. That requires not just military
might, but economic resilience, financial agility, and
industrial strength. During today's field hearing, we will
explore ways to use the Defense Production Act to secure supply
chains and strengthen our domestic industrial base, while
ensuring that our Federal agencies have the tools they need to
meet 21st century threats. The DPA needs to be anchored in its
strategic goals embedded in the Truman administration, but be
modernized, reorganized, and focused for these 21st-century
challenges. I thank Chairman Davidson for his leadership on our
subcommittee and look forward to today's discussion. I yield
back.
Chairman Davidson. Thanks, Chairman Hill. Today, we will
divide our witnesses into two panels. For the first panel, we
welcome the testimony of Mr. Jeffrey Frankston, the acting
deputy assistant secretary of defense for industrial base
resilience at the Office of the Assistant Secretary of Defense
for Industrial Base Policy; also, Dr. Charles Ormsby, acting
director of the Materials and Manufacturing Directorate at the
Air Force Research Laboratory. We thank you both for taking
time to be here. You will each be recognized for 5 minutes to
give an oral presentation of your testimony.
Without objection, your written statements will be made
part of the record.
Mr. Frankston, you are now recognized for 5 minutes for
your oral statement.
STATEMENT OF MR. JEFFREY W. FRANKSTON, ACTING DEPUTY ASSISTANT
SECRETARY OF DEFENSE FOR INDUSTRIAL BASE RESILIENCE, OFFICE OF
ASSISTANT SECRETARY OF DEFENSE FOR INDUSTRIAL BASE POLICY,
DEPARTMENT OF DEFENSE (DOD)
Mr. Frankston. Thank you, sir. Chairman Hill, Vice
Committee Chairman Huizenga, Subcommittee Chairman Davidson,
Representative Moore, good morning. Thank you for the
opportunity to speak with you today on the critical role the
Defense Production Act plays in ensuring the United States
maintains the industrial strength needed to support the interim
national defense strategic guidance and sustain its competitive
edge. It is an honor to speak to you, for this aviation geek,
in this facility to talk about the industrial base and building
back to where we need to be.
Unlike some of the airplanes in this facility, the DPA is
not a cold war relic. It is a vital statutory tool, one that
enables the Department to identify and respond to industrial
shortfalls, reinforce supply chain integrity and resilience,
and accelerate production in support of urgent operational
needs. In an era where geopolitical competition is
intensifying, particularly from China, industrial capacity
remains a key determinant of our deterrence. We continue to see
challenges that test our industrial resilience, and we have
seen renewed cyberattacks targeting U.S. aerospace and
shipbuilding firms, expanded Chinese restrictions on exports of
critical minerals, and mounting cost pressures on cross-defense
manufacturing. Our shipyards are overburdened. Our munition
suppliers are operating at maximum throughput but are still
falling short of surge demands. These challenges are cumulative
and compounding, and they demand more than reactive
procurement. They require flexibility and coordination between
government and industry, and the DPA provides that and more.
Revitalizing the defense industrial base is foundational to
restoring deterrents and rebuilding our military. Under this
administration's leadership, we are executing a deliberate,
data-driven strategy to rebuild U.S. defense production
capacity and shore up domestic supply chains. We are leveraging
key authorities, like DPA Title III, to address fragile nodes
across priority sectors, like munitions and strategic critical
minerals. We have reduced barriers to entry to expand
participation in the defense industrial base for small
businesses and nontraditional vendors. Through other
transactional authorities, flexible acquisition vehicles, and
improved acquisition guidance, we are fostering competition and
accelerating innovation. These vehicles offer a unique ability
to scale the Department's effort to foster competition and
collaboration between the government, traditional businesses,
and nontraditional vendors. Efforts like this are about more
than improving industrial capacity. They are part and parcel to
ensure a resilient, responsive, and adequately distributed
defense complex, capable of meeting both wartime demands and
maintaining a credible military posture that effectively deters
our adversaries.
The DOD uses the DPA every day in our mission to safeguard
vital U.S. national interests. Title I authorize the President
to require industry to accept and prioritize contracts and
orders to promote the national defense. We leverage Title I
authorities for priority capabilities, including long-range
fires, integrated missile defense, and replenishment of
critical munitions. We are taking active steps to continue to
improve the Defense Priorities and Allocation System, including
clearer onboarding guidance for new suppliers, rapid internal
approval processes, and streamlined compliance mechanisms for
small and mid-size vendors. Title III is a force multiplier
where market dynamics alone are insufficient to ensure our
domestic industrial base has the capabilities we need for
national defense.
In fiscal years 2020 through 2024, approximately $2.8
billion was awarded to 194 projects under this program. So far
in Fiscal Year 2025, the program has made awards totaling more
than $500 million, and these investments are complemented by
$88 million in total recipient cost shares since the beginning
of the fiscal year. These investments, just a sample, go toward
restoring critical chemical production, expanding domestic
manufacturing for solid rocket motors, establishing secure
supply chains for strategic and critical minerals and
materials, and in concert with our allies and partners. These
investments are also designed to improve economic viability
where sustained demand is critical to maintaining a healthy
market and resilient industrial base.
Title VII is a key enabler of investment screening and
supply chain protection. The Department co-leads approximately
6 percent of all Committee on Foreign Investment of the United
States, or CFIUS, reviews and has referred more than 75 non-
notified transactions just in the past year. These authorities
allow us to identify and prevent adversarial capital from
gaining control over sensitive production pathways. The recent
expansion of CFIUS review over more real estate sites is a good
first step, but we need to build on this foundation. The
Department strongly supports full reauthorization of the DPA.
Let me close by underscoring that deterrence is built long
before the potential for conflict emerges. It is built in our
factories, on our shop floors, and in the continuity of our
supply chains. The DPA is how we turn strategic priorities into
industrial reality. It is how we ensure our warfighters are not
waiting for parts, materials, or readiness itself. I look
forward to your questions and continued collaboration in this
shared mission.
[The prepared statement of Mr. Frankston follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Davidson. Thank you, Mr. Frankston. Dr. Ormsby,
you are now recognized for 5 minutes for your oral statement.
STATEMENT OF DR. CHARLES D. ORMSBY, ACTING DIRECTOR, MATERIALS
AND MANUFACTURING DIRECTORATE, AIR FORCE RESEARCH LABORATORY,
WRIGHT-PATTTERSON AIR FORCE BASE
Mr. Ormsby. Subcommittee Chairman Davidson, Committee
Chairman Hill, Vice Chairman Huizenga, and Representative
Moore, good morning. Thank you for the opportunity to testify
today. I am happy to speak regarding the Defense Production Act
Title III program. I will discuss the Executive Agent Program
Office, our role, our history, and the status in executing the
Defense Production Act Title III.
I serve as the acting director of the Materials and
Manufacturing Directorate within the Air Force Research
Laboratory headquartered here at Wright-Patterson Air Force
Base, and in this position, I lead the Defense Production Act
Title III Executive Agent Program Office. The Executive Agent
Program Office is staffed by a multidisciplinary team,
including program managers, scientists, engineers, national
environmental policy experts, purchase agreements specialists,
financial managers, and other subject matter experts required
to execute often complex and unique projects. The Executive
Agent Program Office is central to the practical execution of
Defense Production Act Title III investments for the Department
of Defense.
While the Executive Agent Program Office manages the
operational and technical aspects, the projects are authorized
and funded by the Office of the Under Secretary of Defense for
Acquisition and Sustainment. Specifically, the Manufacturing
Capability Expansion and Investment Prioritization Directorate
within Industrial Based Policy is responsible for the Title III
program and its funding. This organizational structure
indicates a clear division of labor, with Industrial Based
Policy providing the strategic guidance and financial
oversight, and Materials and Manufacturing Directorate that I
represent serving as the primary technical and execution arm. I
am pleased to have Mr. Jeffrey Frankston, acting deputy
assistant secretary for industrial base resilience, joining me
today.
The Executive Agent Program Office initiates project
solicitations through a funding opportunity announcement. We
issued a hybrid funding opportunity announcement in July 2019,
which allows for both unsolicited input from industry and
government-initiated calls for specific proposals addressing
vetted requirements. We are also executing other transactions
using a Washington Headquarters Services procurement vehicle.
We are executing 109 technical investment agreements from the
funding opportunity announcement. Additionally, we are
processing one other transaction prototype award that will
include project management support, and we are providing
purchase agreements, agreement officer representative, and
project management support for additional other transactions to
be awarded by the Washington Headquarters Services. The
Executive Agent Program Office executes from six funds,
including core Title III dollars, Coronavirus Aid, Relief, and
Economic Security Act (CARES) Act supplemental, Ukraine
supplemental, Inflation Reduction Act supplemental, Indo-
Pacific Security supplemental, and Israel Security
supplemental. These funds have varying structures. For some
funds, obligation and expenditures have no expiration dates.
For others, there are expiration dates stated.
The Executive Agent Program Office's diverse staff of
engineers and scientists are proud to provide critical
technical depth for assessing industrial-based capabilities and
ensuring investments achieve a resilient defense industrial
base. Notably, recent examples include a project that
significantly improved production of gallium nitride monolithic
microwave integrated circuits, achieving a threefold yield
improvement at a 76-percent cost reduction. Another project
expanded domestic nickel production, identifying the purist
nickel in the United States and perhaps globally. The purity
was so good, examples were placed in the Smithsonian just last
week. Our expertise extends to managing projects across
critical chemicals, critical minerals and materials,
hypersonics, radiation-hardened microelectronics, castings and
forgings, and energy storage and battery value chains.
The Executive Agent Program Office employs over 60
government civilians and contractors to support the program in
full-time and part-time positions. Executive Agent Program
Office personnel benefit from a strategic understanding of
their technical fields that extends to science and technology
projects they support outside of the Title III program. This
enables our team to initiate materials and manufacturing
technology programs of great value to the Department of
Defense. The Materials and Manufacturing Directorate through
the Executive Agent Program Office takes pride in our 33 years
securing the defense industrial base for our Nation. I thank
you for the opportunity to testify today, and I look forward to
your questions.
[The prepared statement of Mr. Ormsby follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Davidson. Thank you, Dr. Ormsby. We will now turn
to number of questions, and so I will recognize myself for 5
minutes.
Mr. Frankston, you highlighted, really, the three titles
that are functional, and just by structure--Title I, Title III,
and Title VII--that will tell you it has undergone some
revisions. For the most part, it has been deletions and not
additions over the years: Title I for simplicity and
prioritization, Title III for investments, and Title VII for
screening. I wonder if you could highlight, particularly, maybe
a cost-share example, of how you are deploying capital to
address a DPA priority for the supply chain and how that works.
How do you screen for it? How do you decide to make the
investment? How does that work out? You highlighted $88 million
that you are deploying in the market, maybe one of those
projects that is addressing a critical shortage.
Mr. Frankston. Sir, thank you very much for the question.
The DPA gives us flexibility to attack a number of different
key priority areas. One of those that we have been focusing on
intently of late is critical and strategic minerals and
materials, given some of the supply chain challenges that have
been highlighted due to Chinese export restrictions and
controls. We have recently put out a couple of projects just in
the last few weeks, but previously to those, we have a number
of projects where we give just a little bit of dollars with
DPA, and that comes to a cost share either from a private
equity or venture capital for those projects. A lot of times we
are just signaling to the company to show that we have a
sustained interest in this priority, capability, or mineral in
this particular case, and that is what these companies need for
their own investments, or to get outside banking help to
sustain their critical mineral production.
Chairman Davidson. Yes, thank you for that, and you
highlight critical minerals, and, obviously, that is a shortage
for the country. It is a crisis, not just for the defense
supply chain, but maybe more broadly. Given that this is the
first time we are updating DPA post-COVID, maybe you could talk
about some of the other areas that you look at in terms of
prioritization or investment in healthcare or pharmaceuticals,
other sectors that maybe are on your radar screen.
Mr. Frankston. Thank you. Our current priorities, are
critical minerals missiles and munitions, are at the top of our
list. There are many other sectors where we have critical
shortfalls in our defense industrial base. Minerals and
materials are at the basis and the fundamental nature of
everything that we do. If we do not have a particular mineral,
it does not matter if we have 95 percent of all the other ones
for a particular weapons system, we are still short because of
that requirement, and so that has our direct key focus and
attention.
Missiles and munitions are our direct way to project force
and enable capability, and so we have challenges, be it to meet
the needs that our Nation demands for the conflicts and the
adversaries that we may face; and so, we are deploying our
capital, deploying DPA to get after key shortfalls, to expand
capacity ahead of a conflict so that we are not short once the
balloon goes up.
Chairman Davidson. Yes, thank you. I mean, it is an
adaptation of a different quote, but you go to war with the
supply chain you have, not the one you wish you had, right? Dr.
Ormsby, you have highlighted both cutting-edge technology and
then more mature technologies, like castings and forgings, and
I wonder if you could highlight in your work how you balance
those needs to really meet the national security threats that
we need to address.
Mr. Ormsby. Yes, sir. Thank you for the question. I would
say that, first off, it is absolutely a partnership with Mr.
Frankston. He sets the priorities. We execute the programs. So,
he sets the balance of the portfolio, but we do have a number
of projects in the last several years that have focused on
castings and forgings for Navy applications, for Air Force
applications, as well, as I said, balance across
microelectronics needs, hypersonics needs, you name it, really
set by the priorities coming out of the Office of the Secretary
of Defense (OSD). Then we go out and work with the industry
partners to actually execute the programs.
Chairman Davidson. Yes, thank you, and not only is Wright-
Patt central to the capability to run procurement and the
Materials Command, the cutting-edge procurement at Air Force
Research Laboratory (AFRL), you also have capability at threat
assessment, and so it was nice to bring some colleagues in and
highlight the capabilities here at Wright-Patt. Again, thanks
to the team for hosting. I will yield my time and now recognize
Chairman Hill. Mr. French Hill is the chairman of the full
committee and represents an area of Little Rock, Arkansas.
Chairman Hill. Thanks to both of you for being with us
today, and greetings from Little Rock Air Force Base and the
19th Air Wing in Little Rock to everybody here at Wright-Patt.
Mr. Frankston, let me start with you. Looking at Title I, just
on the priority setting, I am a business guy, so I am going to
ask a pretty obvious question, which is, if everything gets a
priority rating, what is a priority?
Mr. Frankston. It is a great question, sir. Thank you very
much for the opportunity to answer. We spend a lot of time
working with the services, hearing from industry about the
prioritization matrix. All DOD orders are generally given a
higher priority just to compete against civilian markets to
ensure that we get the weapons and the capabilities that we
need, but we work daily with our services and our industry
counterparts to be responsive when an issue is raised, when
there is a conflict on a particular prioritization. That in and
of itself, giving it a priority rating, does not solve the
issue if there is still a challenge in the supply chain itself.
That is where DPA Title III and the other authorities that we
have to go resource that supply chain come in, but we will flag
it and raise it for attention, and these have our highest
priority to be responsive when a bottleneck is raised.
Chairman Hill. Does that mean that you really have a super
priority system? Should the advisory council--for example, you
set DOD priorities, but you have a different grade that is a
step above that one, there is a bottleneck, and it is a DPA
priority and make that distinction, so that instead of 2.5
million priorities over the last 5 years, there are fewer that
are directly related to the specific benefits of Title III, for
example?
Mr. Frankston. Sir, there are two ways we approach this.
One is we have something called the DX rating. It does not
actually stand for anything, but that is our highest priority
systems, and so there a handful of those, because to your
point, there are only so many silver bullets that you could
spend from a prioritization but these are given to our most
sensitive, critical/urgent capabilities, and so they do have a
little bit of a step above the rest. Alternatively, we also
have within Title I something called special priorities
allocations where we work down at the lower component level,
where we find that there is a bottleneck or a key widget or
item that is a chokepoint in supporting multiple programs. We
can work to prioritize that, work with the services, work with
industry, and then, if necessary, given a capacity shortfall or
other challenge, we then would deploy DPA Title III to help.
Chairman Hill. In Title III, if you look back over the past
5 years, it has been very active. What is the civil service and
contractor breakdown in your chain of command?
Mr. Frankston. We have a very small, but highly skilled and
empowered team. I only have a handful of people on our side,
and it is similar, I would think, with AFRL. I have one DPA
Title III manager. I have a couple other civilians that are
assisting. I have one The Defense Priorities and Allocations
System (DPAS), so our prioritization manager. We have several
billets that we are trying to fill, and then we have a handful
of contractors behind that. With the support from the Congress
and our administration leadership, we have support to expand
that, but it is necessary to manage the breadth and scope of
both the program and then the challenge in front of us.
Chairman Hill. Given the pressure on the supply chain from
the current conflicts around the world you have talked about in
your opening statements, and then this existential threat to
reshore or friend shore our strategic needs that are so
competitive, how many additional staff do you think you need
that would accelerate the application processing? What is the
right speed for the application processing?
Mr. Frankston. Thank you for the question, Chairman. We
feel that at least two more civilians for each of the programs
and titles would be useful. We are conscious of not becoming a
large staff that adds bureaucracy to the process, but a couple
of trained, skilled civilians. Luckily, we have support for our
leadership to move out on this and then with some requisite
contractor support. Then also, we rely on the partnership with
our services, like AFRL, but then all the other military
services who are helping us evaluate, assess, and ensure that
when we make an investment or plan to make an investment, that
there is a receiving end of that investment, whether through an
industry partner or a program office, to ensure that investment
is worthwhile.
Chairman Hill. Good. Thank you, Mr. Chairman. I will yield
back and look forward to the second round.
Chairman Davidson. Thank you, Mr. Hill. I now recognize the
vice chairman of the full committee, Mr. Huizenga, who
represents Western Michigan.
Mr. Huizenga. Thank you both, Chairman Davidson and
Chairman Hill. I appreciate the opportunity to be down here. I
actually represent the Battle Creek International Guard
facility up in Battle Creek. We had a briefing earlier with
someone from the 110th Air Wing, and I just want to say thank
you and extend my gratitude to them. They operate the MQ-1s and
9s out of Battle Creek, and obviously, that is part of the
portfolio that we are talking about here. I want to try to
touch on a couple of things. It might seem a little disjointed
but based on some experience that we had previously going
through reworking of CFIUS, I would like to know more about,
specifically from Mr. Frankston, how your operations fit into
that CFIUS operation and that review.
Mr. Frankston. Thank you for the question, Vice Chairman.
CFIUS is managed by one of our sister offices, so it is still
within the umbrella of our Industrial Based Policy Office. We
collaborate with them daily. The CFIUS reviews, they have the
lead on how they work with the Department of Commerce and the
other interagencies that review each of these potential cases,
but a lot of that is informed by, where an adversary or a
foreign partner may want to make an investment, we need to be
aware of that as we are targeting our own supply chains, too.
It helps us to know where China or another adversary is trying
to gain leverage against a key shortfall that we may have or
something else so there is a constant exchange of data.
Mr. Huizenga. Typically, that had been in manufacturing
space previously. Now we have sort of expanded it into
strategic locations, correct?
Mr. Frankston. Yes, sir.
Mr. Huizenga. Which is literally the review of land and
acquisitions. That might be outside of either a technical
ability or some sort of manufacturing ability, correct?
Mr. Frankston. That is correct, sir, yes.
Mr. Huizenga. Okay, and is it appropriate, in your view?
Mr. Frankston. Yes, it absolutely has a direct bearing
where our adversaries are. So, that land that might be next to
a base or that might be next to an industrial facility may just
be an opportunity for espionage or a different----
Mr. Huizenga. Probably not just sheer coincidence that the
Chinese are interested in picking up land next to a facility,
yes.
Mr. Frankston. Correct. Yes.
Mr. Huizenga. Okay. I am going to track over to Dr. Ormsby
here a little bit because I think this is something that, as we
have gone through discussions of DPA previously, kind of
famously, at least in Michigan, there was discussion when we
saw the shortfall in ventilators, for example, during COVID and
the supply being cut off by China. There was discussion of
implementing DPA to compel our manufacturers to go into that
specific manufacturing. Ford, is my recollection, actually
voluntarily stepped up and changed some of their production to
be able to fulfill that, but that is outside of the traditional
role of DPA and certainly what you have been talking about with
these core VI funds, the Title III dollars. I am more
interested in how you see how the CARES Act supplemental funds,
how the Inflation Reduction Act funds fit into that. Then we
see the foreign policy side of this with Ukraine supplemental,
the Indo-Pacific security supplemental, and the Israel security
supplemental funds. Explain to everybody that might be watching
this, and certainly for us up here, where you see these
different funds and how they fit. You had mentioned there are
expiration dates on those, if you could outline that.
Mr. Ormsby. Yes. Thank you for the question, Vice Chairman.
I think a lot of that really does go to Mr. Frankston where we
are setting the priorities within the legal authorities that we
get and the funding authorities that we get, and then in our
office, we execute the priorities, basically, so I would say
the various funds do apply to needs that we have. As we look at
replenishing munitions, replenishing stocks, it does help. The
expiration date issue that you bring up can be a bit of an
execution hindrance for us, to be honest with you, in that,
especially as we get large-dollar infusions coming in, and I do
not want to say unplanned, but maybe not expected well in
advance, right, with restrictions on how you can use them. Then
we have to fairly rapidly come up with a strategy, and we have
to get those funds on agreements and issued, which causes us to
have to do some prioritization of who we are working with, when
we are working with them with our limited staff.
Mr. Huizenga. My time has expired, but I look forward to
exploring that a bit more in maybe a second round, so I yield
back.
Chairman Davidson. We will have a second round. I now
recognize the gentleman from North Carolina, Mr. Moore, who is
also the former speaker of the House of the State of North
Carolina's House of Representatives.
Mr. Moore. Thank you, Mr. Chairman, and thank you for
hosting us here. This has been an incredible visit, and this is
an absolutely amazing facility and amazing base. I will tell
you, with the continued consolidation of our domestic
industrial base, it seems, to me, more important than ever to
recognize and support the critical role of our existing
industry. Back home in North Carolina, for example, we have a
lot of companies that contribute greatly to the supply chain
when it comes to national defense. In Shelby, which is actually
my home county, we actually have one of the very few copper
smelting and refining facilities in the United States. There is
talk about the availability of rare earth minerals, but you
also have to have the capability to produce those, and so they
actually have a facility that produces 100 percent of pure
copper from copper scrap. The Department of Defense, of course,
has identified high-purity copper as a strategic metal
essential to our national security.
Dr. Ormsby, with copper being DOD's second most utilized
material, which China, though, currently controls, as I
understand, 50 percent of the global smelting capacity, what
are the national security consequences when our domestic
smelting and refining capabilities lack behind those of our
global competitors?
Mr. Ormsby. Sir, thank you for the question. I think you
are hitting on the critical issue, honestly, that Mr. Frankston
brought up early on about the priority for critical chemicals,
critical minerals, critical materials. We are seeing a number
of issues exactly like the one that you bring up in our supply
chains, particularly down very far into the supply chains,
often at levels below where our prime contractors would even
recognize that there is an issue, that they cannot get that
specific material that is necessary for our weapons systems.
That is where the priority on the critical chemicals, minerals,
materials really play into our strategy here and where we are
investing because it is a big issue for the Department.
Mr. Moore. How would export restrictions by other nations
affect the ability to refine and produce copper in the United
States?
Mr. Ormsby. Sir, it is obviously a major issue for us, and
to the point, it is not just about getting the materials that
we need. It is also about being able to process them, right,
and that is why we have such a priority on this investment.
Mr. Moore. Let us say if another nation were to manipulate
global prices, what actions could the DOD take to safeguard
domestic manufacturing?
Mr. Ormsby. Sir, thank you for the question. Would you like
to take it, or would you like me to answer, sir?
Mr. Frankston. Thank you very much. I am happy to help. Dr.
Ormsby noted, as it is not just at the mine itself. It is not
just at the processing itself. It is across the entire supply
chain for our critical minerals and materials, and China has
absolutely been manipulating the market, has been placing
export controls, and so that is one of the reasons why we have
placed such a high priority. It is why one of the earliest
executive orders from this administration was on critical
minerals. It is why we have a Presidential determination waiver
to be able to use DPA for critical minerals and materials
across the entire supply chain so that we can rebuild or
reinforce our domestic capability and capacity. For the mines
itself and where these minerals come out of the earth,
geography matters. Some of this is just not always available in
the United States, and so that is why it is leveraging key
partners and allies that we can utilize, certainly at the mine
level, but then build the processing and the supply chain
capabilities internal to the United States.
Mr. Moore. To that point, even beyond metals, I think it is
equally important that we be able to identify, for example, and
be able to source textiles. You do not think of textiles a lot
of time when you are just talking about national defense, but
the ability to have the proper uniforms, the proper material
for our fighting men and women is critical. Of course, the
Berry Amendment requires the DOD to procure textile and
clothing products made with nearly 100 percent U.S. content. It
ensures a stable domestic supply chain that will protect us
from other nations that seek to manipulate it. I guess this is
kind of a softball question here, but how important is
maintaining an independent domestic textile supply chain
improving resiliency in the event of a near peer conflict?
Either of you want to take it is fine.
Mr. Frankston. Thank you for the question. It is absolutely
critical. It is not just in clothing. Those textiles and
materials go into our weapon systems themselves, too, so we
need to have that domestic capability.
Mr. Moore. We are very proud in North Carolina to have a
significant production capacity of textiles. I will not start
to fight about being the home of flight since we are in Ohio
right now, but we do have some textiles.
Chairman Davidson. I thank the gentleman. We will go ahead
and start our second round for this panel, to be more precise,
so I recognize myself for 5 minutes.
Talking about flight, they do have some beautiful real
estate in North Carolina, but we do have the engineers here in
Ohio.
[Laughter.]
[Cross talking.]
Mr. Moore. I knew it was going to go there, Mr. Chairman,
but I did start it.
Chairman Davidson. It is here in the birthplace of
aviation. Now, the dialog with Mr. Huizenga really, I think,
highlights the coordination necessary across multiple Federal
agencies. Of course, on Article VII or Title VII, when you are
looking at CFIUS, for example, threat assessments, things like
that, it is important. In Title I, I think Chairman Hill
highlighted that if you have 100 priorities, you really have
zero priorities. Picking up with the dialog with Mr. Ormsby,
how is the collaboration across agencies going within Title III
and when you think about multiple Federal agencies, there are
times where the Federal Emergency Management Agency (FEMA) is
really the lead coordinator, so what is the overall office
doing to kind of coordinate kind of across agencies? Mr.
Frankston.
Mr. Frankston. All right. Thank you very much for the
question. There is a monthly working group that FEMA hosts for
all of the Federal agencies that have DPA authorities. DOD
happens to have the vast majority of actual DOD appropriation
for DPA, but we work hand in hand with our partners. When we
have challenges or areas that occur or incidents that occur
that cross into one of our other interagency partners, we have
a fantastic working relationship where we can reach out to
someone like Energy or Transportation to identify opportunities
to collaborate. This can be strengthened. We could work at an
even higher level, at the executive level, more
collaboratively, but again, we work across the interagency. I
will add, in particular, on DPA Title I, Commerce has the lead
role, and we have a phenomenal working relationship with
Commerce. When we get a prioritization, when we need their help
and request, we turn that quick ourselves, and they are turning
it back even quicker to us, so it is a really, really strong
relationship.
Chairman Davidson. Yes, thank you, and I guess it also
highlights the importance of how Congress appropriates money,
and Dr. Ormsby, you highlighted several buckets that you are
actively managing. When you think about not just the
appropriations and the status quo that we have, not just in
DPA, but in the procurement, one of the things that DPA does at
times is sort of bridge the gap between status quo thinking,
and a lot of times the supply chain functions at least
adequately for the status quo. The real question is when you
have those moments of crisis where you have to surge, how
resilient is the supply chain? How important is it to maybe use
some of what we are learning from DPA to look at the rest of
the procurement process or be able to waive even our own
procurement process? I think just to illustrate SpaceX out
there gave us deep space launch capability that we were for a
while depending on Russia. Atlas is still under development
using status quo, traditional procurement operations. At a
certain level, the supply chain arbitrage was really part of
the success story there. How do we make this better?
Mr. Ormsby. Yes, Chairman Davidson. Thank you for the
question. I think you are hitting on a key issue that we have
right now. These authorities can really help us to address
supply chain issues, but I believe Mr. Frankston said earlier
what we really need to get to, and to your point earlier, if
you go to war with the supply chain you have, we need to be
more proactive and looking forward, right, because we have
already identified a number of strategic problems in our supply
chain where we need to address those issues. These authorities
have been very helpful to us in doing that. I think they are
just part of the puzzle, to be honest with you.
There are a number of other tools that we have also from
our science and technology portfolios to other investment
opportunities, but I believe we need a whole-of-Nation
approach, honestly, that looks at everything that we have to be
able to start to proactively prepare for a surge. What we saw
during COVID as the fund jumped up significantly in importance
in number of projects, number of dollars in invested, et
cetera. We mobilized very quickly. It was an all-hands-on-deck
kind of effort, and we have a number of lessons learned in how
we have organized now that we have continued to try to be more
effective and efficient in identifying issues and setting
priorities, but I believe we have to keep that going into the
future.
Chairman Davidson. Yes, thank you both. My time has
expired, and I now recognize Chairman Hill for 5 minutes.
Chairman Hill. Mr. Davidson, thank you, and I do recognize
that Ohio is the birthplace of aviation, but the actual
aviation took place in North Carolina at Kitty Hawk, I think,
and University of Michigan, their nautical engineering program
was started by people who were connected with the Wrights. So,
all the States here, we are all in good stead by being here at
the birthplace of aviation.
Mr. Frankston, the current industrial base, does it have
surge capacity? Where are we the weakest in our defense
industrial base? Going back to my earlier point that we have
wars underway with supply chain constraints, and we have
strategic supply chain supply constraints, so down at the
Pentagon, what worries you the most about surge capacity?
Mr. Frankston. Thank you for the question, sir. I am a
naval historian and analyst by education and trade, and Navy
shipbuilding and ship repair capacity, we made some very
interesting decisions from the peace dividend at the end of the
cold war, and we have a much-reduced capacity for ship repair
and ship construction. This has been a priority of this
administration through the maritime dominance EO and other
critical areas that our office is supporting. As Dr. Ormsby
mentioned, there have been a number of investments in castings
and forgings. We have workforce training programs to expand
because that is something I will also emphasize. For as much as
we have the actual facilities and the equipment challenges and
we need to expand capacity, we need the people that need to be
hired and retained in these industries, and have good, high-
paying, quality, high-skilled jobs and be there when we need to
surge.
Chairman Hill. Proud to be on a very, very cold winter day
at Newport News last year to see the USS Arkansas christened,
our newest fast attack sub. Proud to have her name back on a
ship in the fleet. Dr. Ormsby, Title III grants: as someone
responsible for executing that big picture strategy, do you
receive feedback from businesses about how well mass production
is working under Title III? Just a practical feedback question.
Mr. Ormsby. Yes, Chairman Hill. Thank you for the question.
We do. What we really get from industry a lot, because they do
recognize that we execute a lot of the projects, is those white
papers and those recommendations of places where they see need
for investment, where they are having issues in their supply
chains, and we facilitate them getting in touch with Mr.
Frankston's office to actually make proposals, either through
the other transactions or through our open funding opportunity
announcement.
Chairman Hill. That is good. How does the Research Lab's
ManTech program sort of bridge the gap between early stage
innovation and scalable industrial capacity? I see this as a
constant complaint in Congress is breaking into the supply
chain, which the President is taking action on, which I am
fully supportive of, but once in the supply chain, if you are
an early stage development company, how you can scale up. Tell
me about your bridging there.
Mr. Ormsby. Yes, sir. Thank you for that question. That is
a nice tie between our science and technology investments,
which are a different appropriation that I also control, where
we can invest with our industrial-based partners to develop
manufacturing processes to either get faster production, lower
cost, or to develop a domestic source for production if one
does not exist, for things, in my case, that are important to
the Department of Space and Air Force. There is a MANTECH
program in every service so that you can take the cookie cutter
to the other services. Once we can develop that initial
manufacturing process, then frequently, we see a need to now
scale it, and that is where the Title III authorities really
come to play and help to now get you to the full scale that we
need.
Chairman Hill. You think those are working effectively? If
you could change one thing, what would it be?
Mr. Ormsby. I believe those are working effectively, yes. I
could give you a couple of anecdotal examples where I see them
working, if you would like----
Chairman Hill. Yes, that would be helpful.
Mr. Ormsby [continuing]. but I do not want to take your
time.
Chairman Hill. Thank you. That would be helpful.
Chairman Hill. I yield back, Mr. Chairman.
Chairman Davidson. Thank you, Mr. Hill. I now recognize the
vice chairman, Mr. Huizenga, for 5 minutes.
Mr. Huizenga. Thank you, Mr. Chairman. Let us go back and
unpack the six sorts of funds that we have. We have Title III,
which I think is self-explanatory. We then have what I would
say maybe are conflict-related supplementals--Indo-Pacific,
Israel, and Ukraine--and then we have--I am not sure quite what
category to put this in--CARES Act and the Individual
Retirement Account (IRA). Dr. Ormsby had said there were some
lessons learned from COVID. We can get into those, but I really
want to know each one of those various buckets of funding, what
do they cover? What are they being used for?
Mr. Frankston. Thank you for the question. We have a number
of similar but different funding priorities within each of
those buckets of money. The Ukraine and Israel supplementals,
much of that went toward our missiles and munitions productions
where we found that when we tried to surge some of the key
weapon systems that, in support of those conflicts, the dollars
went to those, whether through solid rocket motors or castings
and forgings----
Mr. Huizenga. To expand capacity?
Mr. Frankston. Yes, sir, but generally, to expand capacity,
just when we knew that we were not able to ramp as much as we
needed to base on the numbers that we needed for our own needs,
and then what we were providing overseas.
Mr. Huizenga. How about Indo-Pacific?
Mr. Frankston. Same thing. Some different munitions,
different types, but, generally, the same areas. We have
shortfalls across munitions, which is where each of those funds
were targeting.
Mr. Huizenga. Okay. How about CARES and IRA? What was that
money used for?
Mr. Frankston. CARES. This was before my time----
Mr. Huizenga. I understand.
Mr. Frankston [continuing]. but a lot of it went toward----
Mr. Huizenga. Not all of us up here supported necessarily
all those expansions, so I am just trying to figure out what
the expiration dates might be on that. Is there a need to be
continuing parts or those programs at all?
Mr. Frankston. I would be happy to get you some additional
details for the record on the specifics on the timeline for the
rest of the money, and the expirations, and where it is going
to, sir.
Mr. Huizenga. Okay.
Mr. Huizenga. Do you have any examples of what CARES or IRA
was used for?
Mr. Frankston. Sure. Some of it went to ventilators. Some
of it went to needles, syringes, protective equipment, a lot of
just medical----
Mr. Huizenga. Basically, where we were seeing a shortfall
in supply chain.
Mr. Frankston. Correct. Yes, sir.
Mr. Huizenga. Okay. Title III, I think, was self-
explanatory. I want to touch on, remaining couple of minutes
here, on chips and production. Obviously, as you were saying,
the critical minerals and then the missiles and munitions were
sort of the focus. You do not have missiles and munitions if
you do not have chips. You do not have chips unless you have
critical minerals; so, explain to me how that might factor into
what we are doing here.
Mr. Frankston. Thank you for the question. Microelectronics
and chips are essential to just about every weapon system that
we have and make. There have been a number of investments
within DPA, but then as Dr. Ormsby was mentioning, in some of
the other funds that are out there and then some of the service
investment themselves have made in this, there have been
several programs that were being used to resource both large-
scale chip production and then some of the more niche
microchips for some of the more explicit weapon systems and
some of the more exquisite capabilities that we have. There is
still a lot of work to go so that we can continue to onshore--
--
Mr. Huizenga. Because we are not there yet, right, in our
production capability. That was part of these various previous
buckets that we were talking about. We were talking about
shortfall because we had sent off a lot of our weapons systems,
but then it also seems that we have some gaps that need to get
filled, correct? Is DPA trying to fill those specifically when
it comes to chips production vis-a-vis what we see production
here in the United States versus what is produced overseas?
Mr. Frankston. Yes, sir, and it ranges across the supply
chain, too, just because, whether it is the actual foundry, or
the production of the wafer itself, or the mineral, as you
mentioned, that goes into it. We need to secure both the
supply, not just of the raw material, but the processing, much
of which went to China over the last 30 years; and so, there is
a concerted effort to bring back not just the material, the
mineral itself, but where that chip is being manufactured in
all aspects of the supply chain.
Mr. Huizenga. Finally, you are part of any CFIUS review of
that, correct?
Mr. Frankston. I am not personally part of the CFIUS----
Mr. Huizenga. But CFIUS is part of that review.
Mr. Frankston. Yes, sir.
Mr. Huizenga. Okay. I will maybe reserve my question about
where we are currently on CFIUS review, the H20s and other chip
capabilities and some recent announcements as to where those
are being shipped. My time has expired, but we will continue
this later. Thank you. I yield back.
Chairman Davidson. Thank you. Mr. Moore from North Carolina
is now recognized for 5 minutes.
Mr. Moore. Thank you, Mr. Chairman. I wanted to follow up
with Mr. Frankston about the discussion about the shipbuilding.
One of our colleagues, Representative Jen Kiggans from
Virginia, was one of the members that, frankly, brought me up
to speed on the fact of how far behind we are, particularly
China, in terms of the production of ships between the two
nations. What is the administration looking at to ramp that up?
Like, what is the short-term plan and what is the long-term
plan to facilitate that?
Mr. Frankston. I appreciate the question on shipbuilding.
This is an area of deep concern and passion to me. The maritime
dominance Executive Order (EO)--I do not recall the date that
it came out--was one of the longest ones ever written due to
where we are on shipbuilding and the state of shipbuilding; so,
it is looking across the board, not just for defense
requirements, but then also on the commercial side. There are
weekly meetings across each of the aspects of that executive
order, working for commercial shipbuilding, working for U.S.
military shipbuilding, the Military Sealift Command, the
Maritime Administration through the Department of
Transportation. All of that is critical because it is the same
limited industrial base supporting each of those components, so
that when we work together to go target a pump or a valve
manufacturer, it does not matter if that is going to be at a
company that is supporting a commercial vendor right now. That
valve or pump that is so far down the supply chain could easily
turn to build capacity for U.S. shipbuilding. There are a
number of different efforts, both within our Presidential
budget and what we build into our process, looking to expand
our shipbuilding capability and capacity because this
administration recognizes that we have a particular challenge
to match what China has ramped up with their own capacity.
Mr. Moore. In terms of what Congress can do, obviously
money in terms of appropriation, but in addition to that, are
there regulatory matters? Are there other things that Congress
can do that could help facilitate this process?
Mr. Frankston. I would be happy to get back a formal
response for the record on some of those recommendations, sir.
Mr. Moore. All right.
Mr. Moore. Mr. Huizenga asked you a question, I think,
similarly along the same lines, but the question had to do with
IRA and CARES. Have you been able to go through and look at
some of the procurement and find some areas where funds can be
repurposed? Perhaps funds are going to areas that are not as
critical. Were you able to repurpose that in some of the other
areas where we do see some shortfall, at least in the immediate
timeframe?
Mr. Frankston. We continue to look for opportunities on
where our funding has been aligned, whether from a previous
priority that may have changed based on real-world events. We
are always looking at our portfolio to support not just where
we see things, but where our leadership is directing us; so, we
have some very strong internal guidance from our Department of
Defense leadership on their key priorities. Critical minerals
and missiles and munitions are two at the top, and so we are
looking across our resourcing areas because, again, you cannot
build a missile, a fighter plane, a jet, a tank, a ship if you
do not have the raw materials, the raw minerals nor, if you do
not have the weapons to actually use from that platform.
Mr. Moore. All right. Dr. Ormsby, would you like to respond
to that same question as well, sir?
Mr. Ormsby. Yes, sir. Thank you. I appreciate the question.
I would simply add, not only reevaluating the priorities and
continually looking at the portfolio, but then there are also
times when, for various reasons, we start down a path of making
an award, and in the end, the company does not agree to the
terms, they change their business strategy, our priorities
change, what have you. Then that gives us another opportunity
as well to then redeploy those funds for a different priority.
Mr. Moore. What I would ask is that, as you supply further
responses as appropriate, provide advice for Congress in terms
of ways to streamline the process or to improve efficiency. One
thing this Congress has worked very hard on, as well as the
administration, is improving government efficiency, getting rid
of waste, just trying to cut through the bureaucracy. If there
are things that would require congressional action that would,
I do not know, get rid of some of the shackles that are slowing
the ability to be more nimble and respond, particularly as
other nations take very rapid actions, please let us know that
because I am certainly interested, and I think probably most of
my colleagues are as well. With that, I yield back, Mr.
Chairman.
Chairman Davidson. I thank our witnesses. I really
appreciate your testimony today, and we will pause for a bit as
we switch to our second panel. Thank you very much.
Mr. Ormsby. Thank you very much.
Mr. Frankston. Thank you.
[Pause.]
Chairman Davidson. All right. The Committee on National
Security, Illicit Finance, and International Finance
Institutions will come to order.
Thanks again to our first panel of witnesses, and so now I
would like to welcome our second panel of witnesses. First, Mr.
Robert Faxon is the chairman of the Board at Consolidated
Boring Inc., and Mr. Gordon Follin is the chief product officer
at Beehive Industries. We thank you both for taking time to be
here, and you will each be recognized for 5 minutes to give an
oral presentation of your testimony.
Without objection, your written statements will be made
part of the record.
Mr. Faxon, you are now recognized for 5 minutes for your
oral statement.
STATEMENT OF MR. ROBERT FAXON, CHAIRMAN OF THE BOARD,
CONSOLIDATED BORING INC.
Mr. Faxon. Thank you, Chairman Hill, Chairman Davidson, and
members of the subcommittee. Thank you for the opportunity to
testify today. My name is Robert Faxon, Chairman of the Board
for Consolidated Boring Incorporated, a company formed in 2021
from the acquisition of Faxon Machining in Cincinnati, Ohio,
and a division of ATI, now called American Flowform Machining
in Billerica, Massachusetts. These two companies represent
almost 100 years of combined manufacturing. My testimony
represents the most accurate and truthful representation of the
current situation that I can offer based on my personal
interactions with both government industry and is totally of my
own opinion. It may or may not represent the balance of the
Consolidated Boring Inc. (CBI) team.
I bring over 47 years of hands-on manufacturing experience,
including over 25 years specifically in the defense industry,
starting at the age of 13, working part time in family business
in Cincinnati. Faxon Machining, located in Cincinnati, Ohio,
operates a 185,000-square-foot facility manufacturing warheads
and precision components for critical defense programs, such as
the GBU-57 Massive Ordnance Penetrator, for which we produced 7
of the 14 30,000-pound bunker buster bombs used in the Iranian
nuclear facility strike, BLU-137 2,000-pound bunker busters,
the GMLRS unitary warhead. Faxon Machining played a key role in
the BLU-136 Next Generation Area Attack Weapon Program from
concept and development all the way through full-rate
production as a prime contractor for the U.S. Air Force. The
company is also advancing modernization efforts in artillery
production with plans for a state-of-art facility, capable of
vertically integrated manufacturing, producing up to 450,000
modular artillery shells annually to support evolving military
requirements. Faxon Machining supports major defense
contractors, including General Dynamics, Applied Research
Associates, Inc. (ARA), Lockheed Martin, Northrop Grumman, U.S.
Government, and many others.
American Flowform Machining, based in Billerica,
Massachusetts, operates a 65,000-foot facility focused on
manufacture of large-diameter steel rocket motor cases, many
smaller rocket motor cases. Over 1 million rocket motor cases
have been produced in this facility since its inception. The
American Flowform and Machining (AFM) supplies parts for
missile systems, including stage one Mk 72 rocket motor case
for the SM-3 and SM-6 missiles, Stinger tow rocket motors, and
is launching production of rocket motor cases for a system like
the ground launch SDB-1 for Andrell. AFM also has been
contacted to produce Mk 104 and GMT Patriot rocket motor cases.
Additionally, AFM supports programs such as Zuni Mk 22 mine
clearing systems, just to name a few. We are actively engaged
in innovative companies to support projects like Golden Dome
and Iron Dome.
National Security, Defense, Industrial-Based Challenges.
The demand for large steel rocket motors, especially those 13
inches and larger in diameter, is growing rapidly due to
today's evolving geopolitical environment. For example, the
combined demand for the Mk 72, Mk 104, and GMT Patriot cases is
approximately 3,000 units annually, far exceeding current AFM
capacity of 350 to 400 large rocket motor cases. AFM is
uniquely positioned to address this shortage with a proposed
vertically integrated rocket motor case factory capable of
producing 3,000 cases per year. The facility will strengthen
supply chain resilience by internalizing all manufacturing
processes and steps, reducing dependence on external suppliers
and supporting surge capacity during times of crisis. The new
factory would create roughly 300 skilled manufacturing jobs in
Massachusetts that generate significant cost savings for the
government. Additionally, this factory would play a key role in
supporting current future defense programs, including the
administration's proposed Golden Dome initiative.
Experience with Title III Funding and Recommendations. AFM
has worked closely with the Defense Production Act Title III
Office during its efforts to secure funding for this factory
expansion and has submitted a Title III funding request for a
new facility. While the potential impact is significant, the
process from application to award has proven lengthy and
complex, which can be discouraging for smaller companies to
pursue these opportunities. This delay risks leaving critical
defense manufacturing capacity unmet amid urgent national
security needs.
To address this, I recommend a multiyear predictable
funding and streamlined application process to reduce
uncertainty and incentivize timely project starts. If industry
is being asked to move at the speed of war, then our partners,
being the U.S. Government, will also have to move at the speed
of war. While the primary focus of this funding is the defense
industrial base, it is equally important to support and
strengthen the broader industrial base, including commercial
and non-DOD manufacturers, so that these companies remain
financially viable in the marketplace and can rapidly pivot to
defense production if needed. This approach not only enhances
national security but also promotes reshoring high-skilled jobs
and ensures a more resilient and competitive manufacturing
ecosystem overall.
Conclusion. The investment reforms I have described are
vital to securing our Nation's defense and industrial-based
manufacturing future. With the right support, Consolidated
Boring Incorporated, through its operating companies, Faxon
Machining and AFM, stands ready to deliver the critical
capabilities our military requires, and respectfully requests
that Title III submission already accepted, but not yet funded,
be funded not only for the original amount, but also for the
additional amount necessary to meet current demands. This is
not only important for our company, but the entire defense
industrial base. These efforts can take years to complete under
normal circumstances. Several of the key pieces of equipment
necessary for the Rocket Motor Factory will need to be
manufactured from the ground up, design built, tested, run off,
and installed, and, in some cases, will take well over 2 years
to complete before additional production can begin. If anything
were to occur that impedes a normal operating environment,
these timelines could stretch even further, potentially
delaying completion by several years.
The stakes are too high to risk such delays. Failure to act
now could leave the United States without sufficient rocket
motor production capacity to sustain a prolonged or high-
intensity conflict, placing both our national security and our
warfighters at unacceptable risk. We must act now to be
responsible stewards in meeting the known and immediate needs
our military leaders have clearly challenged us with in order
to properly support our warfighters and our allies. Thank you
for your time. I look forward to your questions.
[The prepared statement of Mr. Faxon follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Davidson. Thank you, Mr. Faxon. Mr. Follin, you
are now recognized for 5 minutes for your oral remarks.
STATEMENT OF MR. GORDON FOLLIN, CHIEF PRODUCT OFFICER, BEEHIVE
INDUSTRIES
Mr. Follin. All right. Thank you, Chairman Davidson,
Chairman Hill, and distinguished members of the committee,
including Representatives Huizenga and Moore. I appreciate the
opportunity to speak with you today on the critical role that
the Defense Production Act has in strengthening our Nation's
defense. I am Gordie Follin, and I am the chief product officer
of Beehive Industries. At Beehive, we are a U.S.-based
manufacturing company with over 300 employees at locations in
Denver, Knoxville, and also in Cincinnati. In fact, we just
opened an expanded facility down in Loveland, about 30 miles
south of here, last week. So it is great to be with you today.
We specialize in additive manufacturing of jet engines for un-
crewed weapon systems, counter-UAS platforms, and drones.
Beehive's mission is powering American defense, and we are all
in on helping the United States and allied nations replenish
their weapons stockpiles, which have been depleted over the
last decades by global conflicts.
Let me provide just a little example to put this challenge
in context. Every month, Russia bombardes Ukraine with over 700
drones, launched in swarms of hundreds at a time, wreaking
havoc across the country. The Ukraine, to defend itself, relies
on advanced missile defense systems, like the Iron Dome and the
Patriot systems provided by the United States and its allies.
These systems work great, but there are two big problems. First
of all, the Russian drones come from Iran, they cost about
$50,000 a piece, and they can make 6,000-plus a year. The
projectiles used in the Ukraine systems to shoot them down cost
between $1 and $4 million apiece, and right now, we can only
make about 2,000 a year. So the problem one, is it currently
costs the Ukraine about 50 times more to defend itself than it
costs Russia to attack it. That is the opposite of deterrence.
Problem number two is, even if Ukraine could afford it, Russia
is able to send 3 times more things at it than they can shoot
down, right? There are definitely disadvantage in this
conflict.
This is just one example. Future examples could include, in
the not so distant future, a U.S. conflict with China, which
would face a similar challenge, and traditional manufacturing
processes cannot solve these problems. The Department of
Defense estimates that to rebuild stockpiles with existing
systems would take more than 13 years and $430 billion, which
is time and money we just do not have, but additive
manufacturing can help solve that challenge by designing
engines in a new way to fully leverage the potential additive.
We see engines that are 25 percent more efficient, less than
half the cost. They can be developed, tested, and fielded in
one-quarter of the time. They can be scaled up to produce more
than 10,000 engines a year in less than 3 years, at less than
20 percent of the cost of scaling conventional supply chains.
By printing jet engines domestically from raw powder, we
eliminate the risk of foreign-sourced components disrupting
supply of these critical systems. The Defense Production Act,
and especially Title III, is essential in making this possible.
Without it, scaling complex, capital-intensive manufacturing
processes like ours is extremely risky.
Beehive has benefited or will benefit in four ways from DPA
Title III. First of all, it allows us to respond rapidly to new
threats. The traditional acquisition process can take 3-plus
years to go from a good idea that we know we need to do to
actually starting. With DPA, you can start in less than a year,
so it is a great tool for that. It also provides preemptive
investment, which allows us to invest in developing new
products and scaling production capacity ahead of demand. Like
you said, when you go to war, you go to war with the supply
chain you have, not the supply chain you want. It gives you a
way to build that supply chain in advance. It also creates
capital security for companies like ours that are privately
funded by extending our financial runway, and also, it signals
DOD's commitment, which encourages future private investment.
That is really key for companies like ours. It also secures
access to critical materials, like high-temperature metals,
which Beehive relies on to make its products.
To maximize the benefit and effectiveness of Title III,
Beehive, we have four recommendations for the committee. One,
preserve and clarify Title III authority to support innovation
that delivers capability at scale, also called prototype-to-
production transitions. This is how we get capabilities to the
field faster with lower cost and risk. Our second
recommendation is tailor Title III programs for agile, advanced
manufacturers. Make it more accessible to nontraditional
defense companies by streamlining contracts through Other
Transaction Authorities (OTAs), adjusting cost-share
requirements, things like that. Recommendation three is
continuing to strengthen domestic supply chains for high-
temperature alloys, nickel, super alloys, and titanium. I think
we have talked about that quite a bit today. Good progress,
just need to continue. Those inputs are vulnerable to
geopolitical risk, yet essential to products like propulsion.
The final recommendation aligns Title III efforts with allied
industrial-based initiatives, especially the North Atlantic
Treaty Organization (NATO) and Australia, United Kingdom, and
United States (AUKUS).
One great thing about additive manufacturing is it allows
flexible distributed manufacturing, but it can only happen if
there are standardization and coordination across nations. In
summary, the Defense Production Act is the government's most
important tool for rapidly responding to defense needs in times
of crisis to protect our country and secure our future. Beehive
urges the committee to act decisively in reauthorizing and
modernizing this essential law. Beehive Industries stands ready
to partner with the Department of Defense, our allies, and this
committee to confront these new challenges and ensure our
warfighters have the tools and technologies they need when they
need them. Thank you, and I welcome your questions.
[The prepared statement of Mr. Follin follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Davidson. Thank you both. We will now turn to
member questions. I recognize myself for 5 minutes.
You both highlighted the need to surge capacity, and, Mr.
Faxon, you have certainly been part of that supply chain over
the last few years as we have surged things to various areas,
Ukraine in particular, with munitions. I wonder if you could
highlight how you could use capabilities that are in DPA to
possibly refine and provide a bridge for capabilities with the
existing kind of status quo acquisition programs. If you look
at arsenals or other programs, how do you use the private
sector to provide surge capacity, and how can DPA help us do
that?
Mr. Faxon. That is a good question. Thank you. One of the
concepts that we had is, really, if you look at the defense
industrial base, it was undermined by the commercial industrial
base. All of our factories that made sewing machines made 45s
in World War II, so there was a conversion of the commercial
industrial base to the defense industrial base. Now we are
focused very intensely on the industrial base, which is fine--I
understand--on this committee, but if we were to invest in a
facility to increase defense industrial base, if we added
funding to increase commercial and a modern technology-driven,
cost-effective factory of the future, that commercial aspect
not only offsets financial requirements for that facility to
maintain its solvency, but it also can be converted back to
defense if necessary and if the defense gets good and
everything gets better, then you take the defense and you
convert it back over into the commercial industry. This
supports our reshoring efforts that the tariffs the current
administration is pushing. It develops the commercial
industrial base so that this is the seed for private investment
to grow that commercial sector.
I think focusing strictly on defense has limitations, and I
think that the financial obligations later are going to be the
word ``sustainment.'' They are going to have their hands out
for sustainment in these facilities. If we build a factory such
as the artillery factory that we propose, it will serve as a
model for any other component--it could be aircraft, it could
be automotive, it could go in a washing machine--but the
automation necessary takes funding to develop. It is a bleeding
edge. Following it will be a leading edge. So, DPA funding to
support a known requirement, such as modular artillery
components, not your standard 795 deforge, but your modular
artillery rounds, that manufacturing technology, we would open
our doors and have competitors and other industries come in and
view it and duplicate that mentality and put that into other
commercial applications. That is how DPA funding could set a
tone for a commercial base.
Chairman Davidson. Yes, thank you for highlighting that.
You look at the capability, flexible factories and the adaptive
nature of some of the technology you guys are employing on your
factory floors, really, is the tip of the iceberg in terms of
what is possible, and if we can incorporate that with our
approach here, I really think we can respond to the times we
are in. Mr. Follin, you highlighted how Title III helps you
turn around a project faster. Instead of 3 years, you can do it
in the first year. How does that cost-sharing approach not just
attract companies like Beehive or other private-sector
operators, but also the suppliers of capital, whether that is
banks or venture or other sources of capital, to have the
confidence that this has got scalability?
Mr. Follin. Yes. Banks and other investors are trying to
evaluate companies for risk in order to make investments, and
the cost of that investment depends on the perceived risk of
the company. I would say, when there is government investment
in projects, it has a double benefit. One is it reduces the
amount of capital you need to raise, and second of all, it
shows alignment with government priorities and pull from the
government for the products that you are manufacturing, and so
it reduces the perceived risk of the company. Therefore, you
are able to raise capital more quickly at a lower interest rate
and have better runway for the company in the future.
Chairman Davidson. Yes. It is one thing, though, to send a
demand signal. I mean, clearly the government wants these
things, so why is not demand enough? Why do taxpayers need to
provide seed capital to certain sectors, and then how do you
strike the balance between that and just turn it into a planned
economy where you have some central planner picking winners and
losers? How do you get that right?
Mr. Follin. Yes. I think the defense industrial base has
been through cycles, and we hear about forecasted ramps in
production demand, but these are very, very expensive systems
to ramp up for, right? You are talking about tens or hundreds
of millions of dollars of investment; so, private industry will
naturally want to wait until the signal is here to start
investing because, essentially, they are borrowing that money
until the demand arrives, and sometimes it does not arrive. I
think, basically, this allows us to go out, make those
investments, secure that, and not have to carry the risk of
those investments actually getting put into full production at
the timing expected.
Chairman Davidson. Yes, Thank you. We will have a second
panel, but I will yield my time and recognize the chairman of
the full committee, Mr. Hill.
Chairman Hill. Thanks, Chairman Davidson. Mr. Faxon, just
continuing that same theme, you made some comments in your
prepared statement about multiyear and sustained funding. Those
were comments that you made, and then the speed of war. Mr.
Moore and I were at a meeting earlier this week out in Wyoming
where that topic came up with some Silicon Valley presenters,
that they were very impressed with the Trump Administration's
approach to this issue, which is, we are going to start
working. We are not going to talk about it. We are going to
take action and being a much more action-oriented
administration, but you have to balance that with the comments
Mr. Davidson just made about things that we need in the supply
chain ramp-up so that it is not government directing things
that maybe do not have long-term viability.
How do you balance all that? I just want to let you
continue your conversation you were having with Mr. Davidson.
You have 47 years of manufacturing experience, so what does DPA
need to have changed in either the statute or its policy to
balance that?
Mr. Faxon. Thank you for the question. The components of
that are actually built by several of the questions that
already came up. What is the requirement of private investment
versus DPA funding? How do those go together? What is the
longevity? What is the risk? Quite honestly, if you look at
normal business growth, if you are double digit on a compound
annual growth rate (CAGR), you are doing really well at 10
percent. We are asked to quadruple in a year, so these ramp-up
cycles are not conducive to your typical business growth. As a
matter of fact, if you tried to do that in a normal
manufacturing business, and I am not talking about a high tech
or something like that, but in hardcore manufacturing, high-
capital businesses. If you go to the bank and say I am going to
quadruple in a year, I think they would rip up your application
and throw you out, so these ramp-up rates are a key component.
The industrial base of it, when we look at what the
longevity is, how long will you commit to how many rockets you
want to buy? We do not really have that, and we do not make
this back in a year or two. In fact, our investment in the
factory, because of vertical integration and cost savings,
offers approximately a 10-percent per-unit cost reduction. If
you really looked at a business cycle of ROI for what we are
asking for of the government, at that pace, would be paid back
in 10 years on cost reductions of purchased products; so,
financial feasibility is not just welfare, give me money, and I
am leaving. It is, I am going to give it back to you.
Now, if the government does not require that quantity over
that period of time, you do not get your return on investment,
that is true, but you are the one asking for it. I do not go
broke because the bank wants me to answer for it when I am not
really the one who is demanding the product; so, that circle of
debt, longevity, and flexibility with the commercial viability,
I cannot emphasize that enough. Leading-edge technology,
whether it is software, hardware, physical presses, or
technology, is, in most cases, transferable, and when we are
going to reshore things, we are not going to do it at twice the
cost. We are going to have to be competitive to make that
successful no matter what anybody says. They say buy American,
but there is a price tag associated. We have to be more
competitive. We can take these specific demands, put them in a
true ROI, and if it does or does not pan out, we still lead
engineering and manufacturing to a higher level and a higher
capability level.
Chairman Hill. Can I get you to break that down and use a
practical example? You cited in your testimony, for example,
that normal production of motor cases was 350 to 400 or
something like that, but the demand was 3,000.
Mr. Faxon. Yes.
Chairman Hill. So, talk practicality here. To get up to a
3,000 motor-case run rate, what kind of investment had to be
made, and over how many months did it take to achieve that,
just to use that practical example you referenced in your
testimony.
Mr. Faxon. High level, our original was around the $80
million investment for 1,300, which is roughly 110 per month.
When you look at the scalability for that, you want to start
with a greenfield for the efficiency and the long-term return.
You do not want to put a band-aid on something you currently
have.
Chairman Hill. Yes. Yes.
Mr. Faxon. You go ground up. The facilitation in the first
year is pretty much non-return on quantity. There are minor
input improvements. In years 1 to 2, certain pieces of
equipment can be acquired. We take our original capacity and
supplement that within year 1 to 2. That helps significantly.
In year 2, most equipment is on the floor and gets evaluated
and run off in year 2 to 3, so you have a small incremental
step in year 1 to 2. Year zero to one is not really a high
return. Year 3 is where you really see your highest return, and
that is where you consolidate all the equipment. These
machines, in some cases, will take weeks and months to move and
years to get, so what you do not want to do is incrementally
fund four small steps and not get to where you want to be.
What we are offering and what I think needs to happen with
companies like ours, because I am familiar with them, great
company. We are offering a national asset. We are offering
something for the next 30 years, not 4. This is not a 5-year
investment. This is setting a tone and a departure from typical
manufacturing. We are not going to win if we keep doing what we
have done. If we buy what we had 10 years ago and it lasted 20
more, this world does not stay still for 30 years.
Chairman Hill. Thank you. We will continue this discussion.
I yield back.
Chairman Davidson. Thank you, Chairman. I now recognize the
vice chairman of the full committee, Mr. Huizenga, for 5
minutes.
Mr. Huizenga. Thank you, Mr. Chairman. You are going to
hear a central theme on this, and I leaned over to Chairman
Davidson when he finished, and I said that is virtually exactly
what I had written down as my question. I was just going to use
slightly less pejorative language when it comes to central
planning, but I think a lot of the question/concern/feedback
that, I think, not just from colleagues, but from taxpayers
that we hear, which is, why are we making these investments
into an industry that is not needed? You cannot predict war,
right? You cannot predict mass war or a conflict like what is
happening in Russia and Ukraine. Mr. Faxon, you did a
phenomenal job explaining it from your perspective on what was
sort of the ramp-up and the need. Mr. Follin, I would like you
to maybe expand on that or give us your take as well. I mean,
you talked about perceived risk, that, really, in a way, the
government funding might be that bell cow, as some might say,
right? Others are going to follow that. They are going to view
that as a lead. Oftentimes, though, when we are doing our
appropriations, we want to see end-of-fiscal-year production.
We have a much different timeline than you might have.
I am really curious, do you believe that the programs that
we have, one, allow you to build the capacity for not just for
an immediate, but for long term. How do we maintain that? Two,
do you have the flexibility to innovate and explore within
those programs? You know, one of sort of the central themes of
a truly free market is the ability to fail and learn from that
failure. We do not like that when we are sending taxpayer
dollars, we do not want to see failures, but are there enough
places where you can take lessons learned and apply it so that
we do have a stabilized production base?
Mr. Follin. Yes, thank you for that question. It is a great
question. I will start with the last piece first. In terms of
the ability to fail, I think when you use DPA Title III dollars
to support development, then it allows the government to
partner with industry as they are developing the product as we
are understanding what are the risks and challenges that it
takes to bring that product into full production and then we
can kind of navigate that together as we learn and come up with
solutions to solve problems that invariably come up through the
development phase. I think DPA allows us to partner in that
phase versus if we were doing it on our own dollars, we would
be trying to figure it out on our own, and sometimes the
government can have solutions or resources they can bring to
bear to also help in those situations.
Mr. Huizenga. Yes. Let me interrupt you super quickly on
that. I mean, this is called the Defense Production Act, so I
think that makes a lot of sense to people when it is defense
related. Are we focused enough on the DPA right now? Is it
really into that defense mode, or have we wandered away from
that from that core objective?
Mr. Follin. Yes. My personal experience is primarily with
DPA for defense, so I cannot comment necessarily on the
percentage of funding that they make outside of defense. I
would say that my experience so far is that it is focused on
the priorities of the administration, of the DOD. In our case,
like, we are working on these critical munitions that I think
we have heard talked about as a priority from the other folks
in their earlier testimony. I feel like it is focused on areas
that are important. Could it be improved? I am sure it could.
What I would say is in terms of--does the funding support
ramping up to actually support the rates, what happens if
volume changes, how fast can you change. I will say one of the
advantages of additive is it can ramp up very quickly. It does
not require, like, big, mega foundries in order to scale it up.
You are basically buying things that look like inkjet printers,
right? They are bigger, they are more industrial, but they look
kind of like that. In terms of timing, in 15 months we can
double production. Right now, we have the ability to make about
2,000 engines a year, and in 15 months, we will ramp that up to
be close to 5,000, and then another 15 months after that, we
could be ready to support close to 10,000, which is what we
have been given by the DOD as a target. Again, you compare that
to 100 years of manufacturing things conventionally, and we can
make 2,000 a year, right? It is really promising, I think, what
it can offer.
The other advantage of additive is it is easy to
distribute. What that means is, once you have a design and once
you have kind of validated how to manufacture it, there are 3D
printers all over the world, right? In a time where you need a
surge, we can take the design, we could export it to a DOD
facility or another industrial facility, and they could make
the design from our design just by putting it on their printer.
It is a pretty automated process. You do not need a lot of
specialized labor to do that, so it is pretty easily scalable.
The other big advantage is that a lot of conventional
manufacturing requires very bespoke, expensive, long-lead
tooling, right, in order to make a part. The 3D printer does
not care what it is printing. It can print keychains 1 day and
print gen engines the next day. It does not care, right? It
does not have a memory. It is not targeted for anything
specifically.
The other advantage of that is as priorities for the DOD
change, we can change what that capacity is being used for,
right? Beehive has picked this mission because this is a big
priority for the DOD, and we think it is probably the area
where additive manufacturing is most fertile, but as priorities
change the capacity could change with the priorities to support
what is being needed. Thank you.
Chairman Davidson. Yes. Thank you. I would like to
recognize Mr. Moore from North Carolina for 5 minutes.
Mr. Moore. Thank you, Mr. Chairman. One of the things that
I have heard from folks is that they feel like the way the
procurement process is set up, and you all alluded to this in
your comments, really is geared toward large companies as
opposed to small-and medium-sized businesses. If I think about
it, probably no better example than, really, here in Dayton,
when I think of a small business. I mean, two guys in a bicycle
shop are what led to the birth of aviation, I mean, and that is
the story of American ingenuity. If you look at how small-and
medium-sized businesses can be more nimble, and agile, and
dealing with market changes and other things, obviously
capitalization and financing is the challenge, and, Mr. Faxon,
you mentioned it earlier.
I just wonder, any suggestions, as guys who are in the
trenches, of ways that the process can be improved in terms of
the procurement and ways to really take advantage of this
amazing, uniquely American thing that we have in terms of the
small-and medium-sized business. I think, frankly, that is one
of the advantages we have over China and other places. Any
suggestions on how we change that to fully utilize that, and
you both are welcome to respond.
Mr. Follin. Yes. Thank you for that. I think a couple of
things. I referred to this in my testimony as well. I think the
first is FAR--15 contracts can be very complex, lots of flow-
down requirements. It requires, in some places, a lot of
systems to be put in place before you can start. It can really
slow down the process. I think using OTAs wherever possible is
much more small-business friendly. I think in our experience so
far that has been the case, but it is not always the case, so I
would say continue to do that. The other big one is, if there
is a way to reduce cost share, I think it absolutely makes
sense. You want companies to have skin in the game as well,
right? We do not want them just to be gambling with government
dollars, but right now, I think, on average, Beehive's cost
share on its programs is between 50 and 80 percent, right, and
so, again, these are still large investments. I mean, Beehive
has invested over $300 million to date. There are not a lot of
companies that can do that, not a lot of small businesses that
can raise $300 million to put ourselves in the position we are
in. From my perspective, those are the two big ones.
Also, I think for a new small business, the process is
pretty complex, and so maybe a little more support navigating
the process early on would be good as well just to make sure
that the flow-down of the requirements and the expectations are
clear. Those would be my suggestions. Thank you.
Mr. Moore. Mr. Faxon.
Mr. Faxon. I think from a bureaucratic standpoint, I would
not have any really strong input. What I would think is there
are a lot of people out there that, if the DPA committee did a
search for key capabilities and targeted the mid-to small-size
businesses, get out and go see them. Take people with enough
authority and understanding to make an evaluation on the spot.
Give them a checkbook. Give them authority. Get in front of the
people. Have a discussion. Evaluate them quickly face to face.
Size up the companies. See what they can do. Ask them. Bring
them into the fold. Go see them. I think that would be my
encouragement to it. It is not a meeting that we would all
leave here and go to our different worlds. Go see them. Solicit
them. Bring them in. Show them the path to be able to do what
they want. There are many Americans out there today that are
highly talented that will work 12-, 15-hour days if given the
chance and the avenue. I think going out to see them, eye to
eye, that would be my suggestion.
Mr. Moore. In terms of doing that, so a small company
develops, for example, the prototype. Mr. Follin, you mentioned
about the 3D printing that can be done, but it sounds like
maybe the capitalization to take that prototype, which is
needed, into full ramp production. All right. What are you
seeing that is working along those lines right now, and where
do you see where there are still the shortcomings, specifically
at that level?
Mr. Follin. Yes. In our specific case, I think DPA and OSD,
we are very creative in finding a way to support what we are
trying to do. Typically, Title III dollars really for capacity
expansion, so it is infrastructure. In our case, you would buy
printers. You would buy computer numerical control (CNC)
machines or whatever. One of the things that I thought was a
really great innovation was looking at, hey, current suppliers
cannot meet capacity, so part of expanding capacity is we have
to develop a new option, right? It included dollars for actual
R&D so we can develop an option that then we can scale. In our
case, about 70 percent of the funds were for actually working
on the innovation and getting it ready to take to production.
The other 30 percent was for capacity, right? I think that is a
nice change from the status quo and something that should
continue, I think.
Mr. Moore. I yield back.
Mr. Davidson. Thank you, Mr. Moore. Look, Mr. Faxon, when
you were speaking earlier, I recalled a conversation with my
banker at one point, who said, ``Did you ever think about
growing more slowly and maybe playing more golf or whatever?"
It was growing a little too fast for the taste of the bankers
and, frankly, for the taste of the bank regulators who wanted
to start treating my line of credit as if I was using 100
percent of it. Mr. Follin, you highlight the amount of capital
raise you have been able to do. It is a lot easier to raise
capital for something new and sexy that could turn into a giant
market someday than for old technology. As promising as
additive manufacturing is and capability, it still cannot do
everything that you can do with a cast part, and certainly,
getting the hardness and capability out of forgings, that is
old, not-so-sexy tech. How do you raise the capital for things
like that, and how important is it that DPA or other means do
it? Because the private sector market has plenty of demand for
castings, forgings, injection-molded parts, or metal-stamped
parts, but if we lose that capability, which, largely, at
scale, we have already, we do not have surge capacity in our
country. Maybe if you guys could highlight and touch on that.
Mr. Follin. Sure. I mean, in a missile, only a small part
of it is printable, right? I think to the point made earlier,
if you are missing one part from a system, then you do not have
the system, right? I think it is not a one-size-fits-all
approach. I think you have to look at kind of holistically
across the whole system where the bottlenecks are and how can
you address those bottlenecks. Our view is, like, additive
manufacturing does play a key role, but it is not the only one,
and there are other areas that are going to need support as
well. Businesses like Mr. Faxon's, right, make a part of the
weapon as well, and it is not additively manufactured, for the
most part. It has got conventional manufacturing, but those
things also have to be ramped up in order to support the
ultimate final demand.
Chairman Davidson. Thank you.
Mr. Faxon. I think something I would add is, when we talk
about the defense industrial base, there is really a broad
variety of technologies. I am incredibly impressed with the
capability of additives. We are not going to make a 30,000-
pound bunker buster bomb through additive. That is not on next
week's agenda, but what is important is to say what companies
can fit what roles. There are companies like Boeing and
Northrop. If you want a fighter plane, do not talk to me, but
if you talk about subcomponent and component level, and it is
block and tackle, needs to be done, takes a lot of hours,
equipment, it is just work, then you can go to these other
places. I think if you really want to increase the capacity,
you have to define where the requirements of the work scope
are. We do not make satellites, we do not communicate with
laser beams, but what we do is we make metal parts. If you can
allocate some of that capacity to this mid-level small
business, they will bleed for you. They will be dying to get
that business. Now, that leaves capacity and other things for
the more technical things that the larger companies really are
good at, so I think that it is important to differentiate what
the work scope is. It is not all the same.
Chairman Davidson. Thank you both. I recognize Chairman
Hill.
Chairman Hill. Thank you, Chairman. I wanted to follow up,
Mr. Follin, on some of your testimony. You made reference to
accelerating contracting tools. Could you elaborate on that?
Mr. Follin. Yes. I think the primary comment is OTA
contracts, other transactional authorities, give more
flexibility in terms of terms and conditions, and also like----
Chairman Hill. Can you give us an example? Just compare
one, non-using that to using it.
Mr. Follin. Yes. For example, there are two primary ways to
do contracting for defense. One would be, like, through a FAR
15 contract, which requires much more detail in how you plan to
allocate costs, much more detail in how you roll up costs. You
have to have cost accounting audits performed on various
components. For a small business, especially a small business
that is not in production yet, being able to provide, like,
validated cost for something that is not invented yet becomes
extremely difficult, right? OTAs allow you to use, like,
engineering estimates, best judgment. You still have to
substantiate it. I mean, it is still competitively bid, so,
nobody is taking advantage of the government, but it gives more
flexibility when you do not have that background or you are
making something that has not been made before.
Chairman Hill. Another piece of your testimony I thought
was interesting, I do think we have to have critical elements
made here, particularly in the defense arena. I have also been
someone who if it is made in other places that are allies of
the United States, I think that is good. It might be a risk.
For example, no one questions the extraordinary manufacturing
capability and invention, hard work, dynamism in South Korea or
Japan, but as a supply chain, if we were in a Pacific conflict,
that would be not the ideal location. This idea of
friendshoring, I think, is important to collaborate and spread
that out, benefits the entire allied nations in case of a
global conflict, whether it is in Europe or Canada or the
United States or in Asia.
Tell me a little bit about alignment. You make your point
about the allied industrial base, so the work your two
companies are doing and the designs you take, those would be,
as you say, duplicable in your particular case at Beehive, in
those other industrial bases. Is that right, and what do we
need to be doing differently in DPA to reflect that?
Mr. Follin. Yes. I think what I am referring to in my
testimony is really around, like, having, like, common
standards so that if you are trying to offshore a design, if we
are going to take our design and send it to Australia, as an
example, for them to manufacture. I mean, the closer the
systems are together. Like, we use a certain kind of printer.
If they use the same kind of printer, then the design is
directly transferrable. If they are using a different kind of
printer, then there is a lot more development.
Chairman Hill. Do you think Mr. Frankston is doing that? Is
he doing a good job of that over at DOD? You think that, inside
particularly the Five Eyes countries but our principal
partners, is that the standard that we try to do that, or not?
Mr. Follin. It is hard for me to say from my seat. I do not
have full visibility of it. I would say that my experience so
far, it is not obvious that it is true.
Chairman Hill. Okay, but it is an area we could collaborate
on, ask questions about how to improve.
Mr. Follin. Absolutely, yes. That is right.
Chairman Hill. I thank you. I yield back, Mr. Chairman.
Chairman Davidson. Thank you, Chairman. I recognize the
vice chairman of the full committee, Mr. Huizenga.
Mr. Huizenga. Thank you, and I am going to actually kind of
continue where the chair was going with this a little bit.
Three of us up here have a side gig of being on the Foreign
Affairs Committee as well, and I had actually been the author
of the AUKUS submarine authorization and we have seen some
pushback on that because of a capability--or, I am sorry, not
capability--a capacity issue. I think it was Mr. Follin who had
talked about sort of the four recommendations that you and
Beehive had. We have kind of gone over the support, the
reauthorization of Title III. We talked a little bit about more
agile non-defense manufacturers being able to qualify. It seems
like we are heading down that road of number four, the allied
initiatives, how we align with those, and if you need to
expand, either one of you expand on that. I also want to go
visit what I think was your number three recommendation talking
about high-temp alloys being needed and so, touch on number
four with our allies, but then how do we then address this need
for the high-temp alloys?
Mr. Follin. Yes. Thank you. Yes, I think the places where
the alignment makes sense are; Do we have the same materials
available at the partner nations, right? The process for how
you manufacture these things does require some commonality, so
if the alloys are a similar composition or preferably the same
composition, meet the same specs, that helps the process a lot.
Also, like I said before, the infrastructure, like different
machines, will require different programming, different
interfaces, and so having some understanding of what that looks
like at each location would enable you to be able to distribute
the manufacturing much, much faster, and then there is still
some specialized labor. At the end of the day, you have to
assemble these bits and pieces into an engine, and that takes
some time. So, if you can plan these things in advance and kind
of manage it as a program, then when you actually need to flip
the switch, you get there a whole lot faster. That is really
what I am referring to.
Mr. Huizenga. Do we have current alignment?
Mr. Follin. I think it is yet to be determined, from my
perspective. I think----
Mr. Huizenga. How come? What needs to happen for you to
determine that we have----
Mr. Follin. Yes. Again, my experience is limited just to
Beehive's experience, I would say, but I think we are pre-
production, and so maybe we are not at the point, yet where
that would start to happen. I will say we have a contract with
the Air Force. Part of that contract is to do an external
production demonstration where we are going to take our design
and send it to a third party and have them manufacture it. So,
that would be a U.S. party to start, so I think that is the
first step in that direction. Ultimately, I think it would be,
hey, if we want to really take advantage of this, I will not
call it forward deployment, but, like, distributed logistics,
distributed manufacturing. Then the next step would be to pull
in these friendly nations and do a similar process, right, just
to anticipate the problems in advance. I think we have not done
it because the process is not there yet. We are probably a year
away from being there, right, so it is something to think about
for the future.
Mr. Huizenga. How do we address this need for high-temp
alloys?
Mr. Faxon. Yes. I would say the number one problem we see
is things like titanium. Most of the world's titanium comes
from Russia and China, unfortunately, and titanium is a really
common alloy in aerospace products. It is pretty high-
temperature capable. It is lightweight, and so, there are North
American titanium suppliers that are able to grow. I think
investing more in those North American suppliers to scale up
and be able to provide those materials is essential. Also,
Canada has sources of titanium. There are other friendly
nations. I think in the past they have not been developed
because there was a global supply and it was not needed, but I
think it is one of the big challenges we face.
I think Representative Moore, he talked about how in North
Carolina, there is, like, one of the only copper smelting
plants left in the country. There is an element called rhenium,
which does not exist in nature. The only way you can get it is
from the smelting of copper. Rhenium is really what is, like,
the secret ingredient in a turbine blade, which is the most
critical component of a jet engine. So, I think things like
that, like, how do we invest in those sources so that we can do
it independently. I think some of the politics change. Some of
the countries that we are competitive with now, we were not as
competitive with 20 years ago and it was not a problem, but we
have backed ourselves into a corner on a couple of these
materials like titanium and rhenium.
Mr. Huizenga. We have maybe over 10?
Mr. Follin. Yes, maybe so.
Mr. Huizenga. Mr. Faxon, you have 10 seconds.
Mr. Faxon. Okay. If I could add one thing, our solution for
this is not nearly as sexy, and everyone who says ``just in
time'' is going to hate this. What we propose in the DPA
funding is not only for the equipment, but for buffer stock of
material because the lead time is months in some cases. If we
put a beautiful factory together and do not have material, we
are going to twiddle our thumbs; so, our issue was, DPA
funding, no business wants to hold 6 months of inventory, but
if we are going to build a factory in a crisis mode, we better
have material on the floor. So, that one-time buffer to feed
out of and feed into would be my suggestion because we do not
have the versatility of some of the things, but we would build
buffer stock, and DPA funding would be key for that. Thank you.
Mr. Huizenga. I yield back.
Chairman Davidson. Good stuff. Thank you. I now recognize
for the final set of questions, Mr. Moore from North Carolina.
Mr. Moore. Thank you, Mr. Chairman. Actually, I do not have
any questions. These two witnesses have done an amazing job
addressing, I think, the questions of the members. I just would
offer up to either of the gentlemen, if there was something you
wanted to say in response to any questions you did not get a
chance to do, I am going to allow either of you to use my time
to do so.
Mr. Follin. Honestly, I do not have any questions back for
you. This is my first experience doing a congressional hearing.
It was an honor to be able to be with you guys today and
understand a little bit of how the process works. Like I said,
I mean, our experience at Beehive is relatively limited, to
date. We have not had a Title III contract yet. We are actually
in the process of negotiating it now, but I would say, overall,
our experience with the process has been great. AFRL has been
helpful, the Air Force has been helpful, OSD has been helpful,
so just glad to contribute and help where we can. Thank you.
Mr. Moore. Mr. Faxon?
Mr. Faxon. I would second that. It is a pleasure to be
here. It is an honor to be here today. Thank you for the
invitation. I appreciate the chance to verbalize and share some
of the thoughts that we have every day in our factory, and I
appreciate your time and your commitment to hear that. I would
say if there was one word I could use, it is urgency. Do not
overestimate capability because you open a checkbook. It may
not buy time, so urgency is my message today. Thank you.
Chairman Hill. Would the gentleman yield?
Mr. Moore. Absolutely.
Chairman Hill. Just curious about the stockpile comment you
raised; I thought it was quite a good one and have your own
micro-parochial interests on stockpiles. I think it would be
good, Mr. Chairman, if we got DOD to send us, if it is
classified or unclassified, an analysis of U.S. stockpiles and
these critical minerals. Mr. Faxon, you want to comment on
stockpiles a little further, and I will yield back to my friend
after your answer.
Mr. Faxon. Yes, because we speak about materials, and that
could go from the base alloys. It could be a titanium sponge to
make titanium. It could be nickel-based alloys for high-
temperature alloys. We can talk about the micro elements of
mining, but we can also talk about stockpiles of raw material.
Before we can machine it, we may have to go through processes,
such as forging, rolling mills, et cetera. When we talk about
lead time, there is a wide variety of saying, hey, we have
material, but that does not mean it is ready to go into a
factory; so, these multi-month lead times and some of these
constraints, like a forging house or a casting facility, these
all have to be considered. The reality and our push is to be
vertically integrated so we were not dependent on outside
services to be able to meet your needs, and that material in
that stockpile is really counterintuitive to typical business
practice. We do not want material sitting too much.
In this case, because of urgency of timing, I think it is a
smart use of funds to buy that time and feed out of it. Once
you do it one time, you do not have to do it twice. The buffer
remains. It is first in/first out. You have to buy it once,
though, and that is where the DPA funds could be very handy.
Chairman Davidson. I want to thank my colleagues. I want to
thank our witnesses. I thank the staff that did all the work
both in the House, but here at Wright-Patterson Air Force Base
and out at the DOD. Really nice to do a field hearing and bring
this out in the community. I think it is a great way to
highlight the capabilities, really, from around the country,
but, in particular, again, right here in the heart of it all,
in Ohio, and the great capabilities at Wright-Patterson Air
Force Base and our own supply chain, but we have a huge
challenge. It is great to see that we are talking about a
whole-of-Nation approach to it and also with our allies.
Without objection, all members will have 5 legislative days
to submit additional written questions to the chairman. The
questions will be forwarded to the witnesses for their
response. Witnesses, if you get them, please respond no later
than September 17.
[The information referred to can be found in the appendix.]
Chairman Davidson. The hearing now is adjourned.
[Whereupon, at 11:52 a.m., the subcommittee was adjourned.]
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