[Senate Hearing 119-77]
[From the U.S. Government Publishing Office]
S. Hrg. 119-77
DEFENSE MOBILIZATION IN THE 21ST CENTURY
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HEARING
BEFORE THE
COMMITTEE ON ARMED SERVICES
UNITED STATES SENATE
ONE HUNDRED NINETEENTH CONGRESS
FIRST SESSION
__________
MARCH 6, 2025
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Printed for the use of the Committee on Armed Services
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via http: //www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
60-351 PDF WASHINGTON : 2025
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COMMITTEE ON ARMED SERVICES
ROGER F. WICKER, Mississippi, Chairman
DEB FISCHER, Nebraska JACK REED, Rhode Island
TOM COTTON, Arkansas JEANNE SHAHEEN, New Hampshire
MIKE ROUNDS, South Dakota KIRSTEN E. GILLIBRAND, New York
JONI ERNST, Iowa RICHARD BLUMENTHAL, Connecticut
DAN SULLIVAN, Alaska MAZIE K. HIRONO, Hawaii
KEVIN CRAMER, North Dakota TIM KAINE, Virginia
RICK SCOTT, Florida ANGUS S. KING, Jr., Maine
TOMMY TUBERVILLE, Alabama ELIZABETH WARREN, Massachusetts
MARKWAYNE MULLIN, Oklahoma GARY C. PETERS, Michigan
TED BUDD, North Carolina TAMMY DUCKWORTH, Illinois
ERIC SCHMITT, Missouri JACKY ROSEN, Nevada
JIM BANKS, INDIANA MARK KELLY, Arizona
TIM SHEEHY, MONTANA ELISSA SLOTKIN, MICHIGAN
John P. Keast, Staff Director
Elizabeth L. King, Minority Staff Director
(ii)
C O N T E N T S
_________________________________________________________________
March 6, 2025
Page
Defense Mobilization in the 21st Century......................... 1
Member Statements
Statement of Senator Deb Fischer................................. 1
Prepared Statement of Senator Roger F. Wicker.................... 1
Statement of Senator Jack Reed................................... 2
Witness Statements
McGinn, John G., Ph.D., Executive Director, Greg and Camille 4
Baroni Center for Government Contracting, George Mason
University's Costello College of Business.
Michienzi, Christine, Ph.D., Founder and Chief Executive Officer, 15
MMR Defense Solutions, and Former Senior Technology Advisor to
the Under Secretary of Defense for Acquisition and Sustainment.
Berteau, The Honorable David J., President and Chief Executive 25
Officer, Professional Services Council.
Questions for the Record......................................... 39
(iii)
DEFENSE MOBILIZATION IN THE 21ST CENTURY
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THURSDAY, MARCH 6, 2025
United States Senate,
Committee on Armed Services,
Washington, DC.
The Committee met, pursuant to notice, at 9:30 a.m., in
room SD-G50, Dirksen Senate Office Building, Senator Deb
Fischer presiding.
Committee Members present: Senators Fischer, Rounds, Ernst,
Sullivan, Schmitt, Sheehy, Reed, Shaheen, Blumenthal, Hirono,
Kaine, and King.
OPENING STATEMENT OF SENATOR DEB FISCHER
Senator Fischer. Good morning. I would like to call the
hearing today to order. The hearing is on defense mobilization.
I am pleased to welcome three witnesses to testify today.
Jerry McGinn is a widely published former DOD [Department
of Defense] official who worked at the heart of the Pentagon's
industrial base efforts.
Chris Michienzi brings a similar resume. She spent much of
her career inside the Industrial Base Policy Office at DOD.
Dave Berteau comes to us from the Professional Services
Council. Before that, he served as the Assistant Secretary of
Defense for Logistics and Materiel Readiness, early put
industrial base revitalization--there seems to be an error
here. Before that he served as Assistant Secretary of Defense
for Logistics and Materiel.
Welcome to the witnesses. Senator Wicker, the Chairman of
the Committee, is detained for a little bit, and when he comes
he will enter his testimony into the record.
[The prepared statement of Senator Roger F. Wicker
follows:]
Prepared Statement by Senator Roger F. Wicker
Today, we face an uncomfortable truth: The United States is
unprepared for a protracted conflict. This is not conjecture. The fact
is borne out by history, current assessments, and the demands of modern
warfare. The Department of Defense and the defense industrial base are
not ready to mobilize to meet a large-scale extended conflict.
If large-scale conflict were to erupt, critical systems would be
depleted in a matter of days. We would probably lose anti-ship cruise
missiles, air defense missiles, and even unguided bombs more quickly
than we could replenish them. Our industrial base does not have the
capacity to surge production because we have not made the plans or
investments that would give it that ability. After decades of off-
shoring, our critical minerals and rare earth supply chains are
brittle. Often, our adversaries control these supply chains. We put up
roadblocks that make it hard for commercial companies to enter our
defense industrial base. The Pentagon rarely coordinates with other
government agencies like the Department of Commerce and FEMA. Both
would be necessary for mobilization. The DOD has very little analytical
capability to develop strategies that would address protracted
conflict, strategies that it could then give to senior defense leaders
and Congress.
This Committee is going to address these problems. We will get to
work this year, in the National Defense Authorization Act (NDAA) for
fiscal year 2026. To begin that process, I am pleased to welcome three
witnesses to testify today. Jerry McGinn is a widely published former
DOD official who worked at the heart of the Pentagon's industrial base
efforts. Chris Michienzi [MACKENZIE] brings a similar resume. She spent
much of her career inside the Industrial Base Policy office at DOD, and
Dave Berteau comes to us from the Professional Services Council. Before
that, he served as the Assistant Secretary of Defense for Logistics and
Materiel Readiness. I appreciate all of you for being here to share
your expertise on this crucial problem.
Industrial mobilization does not happen overnight. It requires
years of pre-war preparation during peacetime. World War II showed us
the power of mobilizing 20,000 companies before conflict began. Today,
we lack that foresight and scale. Clearly put, industrial base
revitalization is not optional. It is existential.
We must take action by rebuilding domestic manufacturing. The
United States should be able to produce what we need without being
reliant on foreign suppliers for resources from steel to
semiconductors. Our manufacturers will not be able to surge capacity in
a crisis of tomorrow unless we make investments today in idle plants,
worker retraining, and material prepositioning. These actions would
echo the successful, pre-World War II planning efforts, but they would
be tailored to today's threats. We will need to expand and streamline
the Defense Production Act and undertake a wholesale modernization of
the Pentagon's industrial base policy office.
We must explore the use of purchase commitments and lean on the
Office of Strategic Capital to provide loans and loan guarantees for
crucial production lines. New sources of supply will need to be
qualified, with an emphasis on advanced manufacturing technologies that
can quickly shift between civilian and military production. We must
incorporate our allies and partners by making it possible to co-produce
weapons with them.
This challenge is bigger than the Pentagon alone. Numerous agencies
will have to cooperate. The Department of Commerce must help secure
supply chains. The Treasury Department will need to freeze the assets
of adversarial companies. Energy will drive power production, and Labor
will train workers. Every corner of American society--private industry,
universities, even local communities--must contribute, just as they did
when Ford built bombers and Kaiser churned out Liberty ships.
The cost of inaction would be catastrophic. It would far exceed the
cost of action right now. A lengthy war would expose our fragility. One
conflict could erode deterrence and embolden adversaries. We cannot
repeat the complacency of the interwar years, when unpreparedness
invited aggression. Congress must act now to fund stockpile expansion,
incentivize domestic production, and mandate interagency plans for
rapid mobilization. This is not about one weapon or one war. We need to
restore America's ability to deter aggression and to defend itself and
its allies if necessary. I look forward to hearing from our esteemed
witnesses on how we bridge this gap. The clock is ticking, and history
will judge us by our resolve. I now recognize my friend and Ranking
Member, Senator Reed.
With that I would like to recognize the Ranking Member,
Senator Reed.
STATEMENT OF SENATOR JACK REED
Senator Reed. Thank you very much, Senator Fischer, and I
want to welcome our witnesses. Dr. Christine Michienzi, Dr.
Jerry McGinn, and Mr. David Berteau, thank you very much for
joining us.
This is a very important conversation, and we are fortunate
to have such a distinguished panel before us.
Throughout history, we have consistently seen nations with
well-prepared militaries lose to nations with superior
industries. The ability to deploy well-trained troops and
advanced weapons to the front line is important in any armed
conflict, but the ability to sustain those forces with adequate
amounts of supplies and munitions is just as important.
The Defense Acquisition University defines industrial
mobilization as, quote, ``the process of marshaling the
industrial sector to provide goods and services, including
construction, required to support military operations and the
needs of the civil sector during domestic or national
emergencies.'' Put more simply, industrial mobilization
represents the Defense Department's ability to call on the
private sector in times of crisis.
I am concerned that the United States is not currently
prepared to do this effectively in a sustained, large-scale or
protracted conflict. The war in Ukraine and the incredible
amount of military support we have provided has been vital for
Ukraine's survival, but it has exposed our own industrial base
vulnerabilities. We have learned that our capacity to provide
vast amounts of artillery shells, precision munitions, and
other modern weapons in a rapid, responsive way, is much more
limited than we realized. Our capacity has expanded
significantly over the past 3 years, but we have relied on
existing tools such as the Defense Production Act to overcome
supply chain problems and increase production. Any future
conflict we may face, particularly in the Indo-Pacific, will
require much greater levels of military-industrial capacity, as
well as interagency coordination to leverage a whole-of-
government response.
The process for large-scale mobilization dates back the
World War II era. When America entered the war, there was an
enormous increase in military production of ships, planes,
artillery, vehicles, and more, which eventually earned us the
title as the ``Arsenal of Democracy.'' However, we must not
forget that the industrial ramp-up actually began long before
the war started, and did not yield significant results until we
were years into the fight. This is an important lesson we
should remember today. Industrial mobilization does not occur
overnight.
Further, while we have a useful model from our experience
in World War II, it is not a blueprint for the future. We must
recognize that the industrial base of today is very different
from any period in the past, especially considering our
reliance on information technology and software-based systems.
We will need to mobilize different sectors of the economy and
workforce unlike any time before. Moreover, we cannot assume,
as we did in World War II, that our production facilities will
be safe from kinetic or cyberattack or that we will have
uncontested supply lines for materials. I would ask our
witnesses to discuss the lessons they have drawn from the war
in Ukraine and what processes they believe need to start now so
that the United States is prepared to win the next contest.
This Committee has spent years examining the challenges
around this issue. We have worked to identify supply chain
problems and to improve investments in long-lead items for the
military. In recent National Defense Authorization Acts,
Congress has directed the Department of Defense to stress-test
its industrial mobilization and supply chain capabilities. The
Department has found a number of challenges, including
integration of software and information technology, but it is
clear that material and labor shortages are the biggest
problems to increasing production.
Indeed, there is nothing more important for our defense
mobilization strategy than our workforce, the men and women in
the defense acquisition corps and the personnel in the defense
industrial base. We cannot solve our industrial mobilization
and acquisition problems without an adequate supply of skilled
and trained workers.
I would note that acquisition reform is necessary, but it
is not sufficient to address the broader issues of industrial
mobilization. In a crisis, having an acquisition system that is
efficient and effective is important, but production capacity
is far more so. Many of the policies and processes we put in
place in peacetime for the sake of efficiency may actually be
counterproductive in a prolonged crisis. That is why I am so
troubled by the mass firings of the defense civilian workforce
which the Administration is undertaking right now.
The urgency around these issues has never been clearer. As
Russia continues its onslaught against Ukraine, and China
calculates its own potential expansion, we have to make sure
our defense industrial base is able to adapt, scale, and
outpace our competitors in the 21st century. I would ask our
witnesses' thoughts on how we might overcome this challenge,
and how we can ensure that the workforce in place is there to
do so.
Thank you again to our witnesses, and thank you, Senator
Fischer.
Senator Fischer. Thank you, Senator Reed. Again, welcome to
the panel.
Dr. McGinn, you are recognized for your opening statement.
STATEMENT OF JOHN G. McGINN, Ph.D., EXECUTIVE DIRECTOR, GREG
AND CAMILLE BARONI CENTER FOR GOVERNMENT CONTRACTING, GEORGE
MASON UNIVERSITY'S COSTELLO COLLEGE OF BUSINESS
Dr. McGinn. Thank you, Chairwoman Fischer and Ranking
Member Reed and members of the Committee. Good morning. It is a
privilege to be here and thank you very much for having this
hearing on this important topic, which is a critical issue
facing the Nation.
The United States has the most lethal and capable fighting
force in the world. Full stop. But as we have seen in recent
war games, as well as in challenges that Senator Reed alluded
to in production capacity for munitions, we have real
industrial base capacity challenges.
These challenges led me to do a study that addressed the
following question, ``How well is the U.S. defense industrial
base prepared to mobilize in the event of a major conflict?''
The short answer, published in our report, ``Before the
Balloon Goes Up,'' is that our ability to win a major war with
a near-peer competitor is very much at risk. Unless senior
officials across Washington and industry pursue bold actions
immediately, we face potentially catastrophic consequences
should the balloon go up in East Asia or elsewhere.
Drawing on historical and recent case, we developed a
series of recommendations to enable industrial mobilization. I
would like to focus on two areas specifically. One is the
authorities and planning capabilities, and then second, our
ability to scale.
In the area of authorities and planning, as you all know
very well, the government's ability to mobilize industrial base
starts with our legal authorities and the policies and plans.
The famous War Production Board of the Arsenal of Democracy in
World War II helped organize government and industry to address
those challenges. Similarly, during the Iraq and Afghanistan
wars, the development of the MRAP, the Mine-Resistant Ambush
Protective vehicles, the use of the Defense Production Act was
critical to help produce those vehicles, and then we all saw
the power of DPA [Defense Production Act] during COVID.
Overall, our legislative authorities are strong, but I
think there are several opportunities before us. The first, as
you know, DPA is up for reauthorization this year. DPA has had
tremendous impact on rebuilding and shoring industrial base
capacity, and it is essential to reauthorize DPA and keep it
focused exclusively on national security issues, particularly
threats from China.
DPA Title III is an important tool for building industrial
capacity. The use of purchase commitments under Title III would
be a great way to enable strong demand signal for industrial
capacity and capabilities such as specialty chemicals and
critical materials. But currently, purchase commitments are not
allowed, or not enabled, because the DPA funds are being
appropriated with procurement dollars, which expire, as opposed
to traditional DPA appropriations, which do not expire.
there is a real opportunity in another section DPA, Title
VII, where we have two sections of authority that have not been
used since the cold war, that are really powerful. One is
section 708, which allows the creation of voluntary agreements
between government and industry that allows collaborative
industry-government engagement on critical supply issues. We
have a few of these available now, but if we would really kind
of invest in these efforts, we could have that collaboration we
had during the War Production Board years.
The second section is Section 710, which allows the
creation of what is called a National Defense Executive
Reserve, which is essentially a group of industry experts that
can come into government during a crisis. This is a tremendous
authority that has not been used since the 1980's.
the other thing we need to do on the planning side is we
have to restart mobilization planning. That ended in the early
1990's. We have to build this across the U.S. Government, and
then we also have to relook some of the executive orders that
govern DPA.
Transitioning from authorities to our capabilities, we
really have to focus on turbocharging our efforts to change how
we design, resource, acquire, and sustain capabilities. As the
Ranking Member talked about, it is not just about acquisition
reform. It is about how we buy. We have to design things for
production. We have to focus less on requirements and have more
adaptive ways to create technologies. More resources would be
helpful, of course, but another way that we can go beyond
appropriations is to really tap the power of U.S. capital
markets as one of our strengths. So building on the authority
that you all created with the Office of Strategic Capital,
there is opportunity to grow the scale of investments, so
private capital can make larger bets in investments.
On the areas of production, we have gotten the prototyping
game down, but it is really now the time to transition more to
production, and there are ways to do that through other
transaction, follow-on production agreements, more buying of
attritable systems and unmanned systems, and the like.
Then finally the area of sustainment is, frankly, our
biggest challenge, being able to do logistics at scale, and
there we can actually do things like create contract line
items, or CLINs, that develop surge capacities. So instead of
having canalized, very limited supply runs, you can have the
ability to grow that. Also, second sourcing and multi-sourcing
are important options to be able to create more capacity.
One final point I would like to make is on allies and
partners. Our recent experience has made it crystal clear we
need a larger industrial base. Engaging our closest allies,
those with whom we go to war, through robust industrial
partnerships will help us build overall capacity.
Unfortunately, time is not on our side. If the Davidson
window is correct, we have 2 years, and it takes a while, as
the Senator alluded to, to mobilize. The Trump administration
and Congress, in partnership with industry and our allies and
partners, must harness innovation, manufacturing capacity, and
other means to unleash the true strength of our industrial base
to deter our enemies in today's very dangerous world. The time
to do this is now, before the balloon goes up. Thank you very
much.
[The prepared statement of Dr. John G. McGinn follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Senator Fischer. Thank you, Dr. McGinn. Dr. Michienzi.
STATEMENT OF CHRISTINE MICHIENZI, Ph.D., FOUNDER AND CHIEF
EXECUTIVE OFFICER, MMR DEFENSE SOLUTIONS, AND FORMER SENIOR
TECHNOLOGY ADVISOR TO THE UNDER SECRETARY OF DEFENSE FOR
ACQUISITION AND SUSTAINMENT
Dr. Michienzi. Thank you, Chairman Fischer, Ranking Member
Reed, and distinguished members of the Committee for the
opportunity to speak with you today on defense modernization,
which is essential for our Nation's security.
The defense industrial base necessary to build our DOD
systems is fragile, but this fragility did not happen
overnight. Key decisions by the U.S. Government and industry
have played a very large role. For instance, decades-long
private sector and public policy approaches to domestic
production prioritized low, short-term costs over security,
sustainability, and resilience. So the industrial base has
become optimized for efficiency and not resiliency.
Just-in-time deliveries versus inventories of long lead
time items cut warehousing costs and increased efficiency but
limits industry's flexibility and responsiveness. The DIB
[Defense Industrial Base] has many single and sole-source
suppliers due to the decades of consolidation. Often those are
foreign adversarial sources that are cheaper but can introduce
risk.
At OSD [Office of the Secretary of Defense], I was in the
trenches of mobilization efforts for almost a decade. I was the
lead for DOD for scaling up production for all of the weapon
systems we were sending to Ukraine, a function I led for
various crisis scenarios since 2017. I was also very involved
in DOD's efforts in response to COVID-19, working with the
interagency partners, using the defense production authorities
Jerry talked about, Titles I, III, and VII, to execute CARES
Act funding to increase production of medical resources,
including prioritization and allocation of supplies, which
becomes important when we are trying to mobilize and surge, and
providing financial support to DOD's suppliers.
As the United States is supporting two conflicts and
preparing for potential conflict in the Indo-Pacific region, it
has become clear that the DIB is not equipped to mobilize to
support the existing activities, much less a competition with
China. Although there are, and continue to be multiple efforts
aimed at mitigating shortfalls that support mobilization, there
are some systemic issues and causal factors that are not being
addressed.
The most important of these is DOD's acquisition behavior.
I am not referring to acquisition reform here, such as
different ways of doing contracting, but to the decisions that
are made by the acquisition community that are the root causes
of many of our supply chain issues.
The industrial base is very seldom a consideration when
most acquisition programs make certain decisions, such as
increasing or decreasing procurement quantities, or even
analysis during major milestone decisions. When mitigating
supply chain issues, DOD is often treating the symptoms and not
the cause. I will highlight two representative examples, but
there are many more I can elaborate on.
The government is funding efforts to reshore and ally shore
critical supply chains, and partners and allies are critical to
solving this issue. However, if we do not bring demand back to
those more secure sources, they will not survive. Even though
DOD programs have the authority to direct sources of supply,
they most often do not, letting industry choose. Because
industry is profit driven, they will almost always choose the
cheapest source, which is unfortunately often a Chinese or
other adversarial source, or a more secure source.
DOD reinforces this behavior by choosing the lower-cost
proposal among technically equal options. Industry will not
risk losing a contract by using a higher-cost supplier, even if
that supplier is more secure. DOD also does not like to direct
sourcing because it shifts liability from industry to
government if something goes wrong with that material or
component. But if we are truly going to have secure suppliers
for these critical items, DOD and other agencies, because DOD
is often only 1 to 2 percent of the demand, should be required
to use a U.S. or allied source if one is available, that meets
requirements, and also to incentivize industry to use those
sources with policies, such as price preferences and contract
selection, for instance.
Another example is one of the major constraints we face
when scaling production for weapon systems for Ukraine and
other crises, and something that continually plagues DOD, which
is obsolescence. The way DOD deals with obsolescence is
reactive and ad hoc, at best. With a few exceptions, programs
do not plan or budget for obsolescence, choosing instead to
wait until an obsolescence issue occurs to determine a
mitigation plan and scramble to find funding to execute that
plan before time runs out.
Obsolescence was the main reason we could not make more
Stinger and PAC-3 Patriot missiles when the Ukraine conflict
started initially. Acquisition program managers and even
service acquisition executives have told me they cannot afford
to budget for obsolescence, but many studies have shown that
being proactive by planning and budgeting in advance saves time
and cost. Programs should be required to plan and budget to
deal with obsolescence more proactively.
Last, as we have been trying to mobilize the DIB to support
various efforts, I am often asked why can't we do what we did
in World War II, as described in the book, Freedom's Forge. I
gave a lecture each year on mobilization to the entire class of
the National Defense University's Eisenhower School, and one of
the slides I always presented was ``Why not Freedom's Forge?''
Where I outlined the conditions that were very different
between what was happening, and Senator Reed mentioned one of
those, and what is happening now that make it impossible to
replicate that scenario. I am happy to discuss these in further
detail.
I will stop there by saying I appreciate the Committee's
leadership and focus on this strategic topic and in helping in
any way I can. I have submitted written testimony for the
record, and I thank you for the opportunity to testify today,
and am happy to answer any questions you may have.
[The prepared statement of Dr. Christine Michienzi
follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Senator Fischer. Thank you, Dr. Michienzi.
Mr. Berteau, you are recognized for your opening statement.
STATEMENT OF THE HONORABLE DAVID J. BERTEAU, PRESIDENT AND
CHIEF EXECUTIVE OFFICER, PROFESSIONAL SERVICES COUNCIL
Mr. Berteau. Thank you, Senator Fischer, Senator Reed, and
the Committee. We really appreciate the opportunity to be here
today.
I am David Berteau. I am the President and CEO [Chief
Executive Officer] of a trade association, the Professional
Services Council. What I need to reflect for the record is I am
here today in my personal capacity, and opinions and
suggestions that I make today are my own and not those of my
organization, who would otherwise be considered guilty.
There has been a lot of talk about the World War II example
of full-scale mobilization, and really in American history we
have really only had two such examples, the other one really
being the Civil War. As old as I am, I was not alive to
participate in World War II, as part of that process, but my
experience is actually in a different segment that has already
been touched on a little, and that is the cold war, and
particularly the Reagan buildup during the cold war.
I arrived at the Pentagon in 1981, served there until 1993,
and was very actively involved in a number of issues there.
There are a couple of lessons I would like to propose to you
from that period of time, that may be relevant to the
discussion today.
The first is that we actually had an operational plan and a
scenario on which we could calculate what our mobilization
requirements were. It was, in fact, Soviet tanks coming through
the Fulda Gap in Germany and invading Europe. That was the
driver. That was the thing that if we did not prevail there, we
would go nuclear, and a global nuclear war was clearly not an
option we wanted to pursue, although we were prepared for that.
How were we able to use that? We were able to build the
requirements and actually secure the funding from the Congress,
because we had a common agreement between the White House, the
Pentagon, and the Congress as to what the threat was we were
facing and what the scenarios were on which we would have to
plan and be prepared to execute. So the first thing is we had
that common ground.
I do not think we have that today, and I think one of the
most important things this Committee can do is drive us to get
that common understanding of what the scenario is. We had an
operational plan, which is the fight today piece, and then we
had a scenario which is how that evolves over time. We need
that in place today.
By the way, by being able to do that, we were able to
propose funding for surge capacity, for war reserve spares, for
training, for sustainment investments, for actually deploying
and being able to show that we were able to do this, and the
appropriators would give us that money because it was justified
and everybody agreed on the basis for it. We don't have that
today.
An example of that, in fact, one of the lessons from
Ukraine is the multiyear procurement for expanding munitions
production capacity. The Pentagon's first submission to the
Congress was decremented by a lot of the extra money that was
going to go into building the multiyear procurements for many
of those programs because there were higher priorities the
committees had to achieve than to put those in place.
Ultimately that got fixed, but it took a long time to get
agreement on that. So we have to have that agreed-upon set of
scenarios on which to base requirements.
The second thing that we learned from that cold war
experience is the best way to deter was to demonstrate--
demonstrate, not put on paper, but demonstrate--that we had the
capacity to deliver that. So every year we would have massive
exercises, where we would literally deploy forces from the U.S.
and sustain those forces in operations in Europe, thousands and
thousands of troops from all the NATO [North Atlantic Treaty
Organization] countries combined, clearly showing the Soviets
that we could make it work. That demonstrated capacity, I
think, is the second key lesson.
The third key lesson, that has been referred to a lot here,
is the partnership with industry, and that partnership with
industry is oftentimes an arm's length partnership. Dr.
Michienzi did a good job describing some of the flaws in that
process, and I think that partnership has to include long-term
contracts. It has to include stable designs, so you can
maximize productions. That is one of the biggest advantages we
actually had over Germany in World War II. Hitler and his team
could not stop putting change orders into programs because new
stuff would come along and they would actually stop production
in order to do it, whereas we would actually move those new
ideas into the next iteration of different aircraft, so we
maximized production while still getting the benefits of new
technology and research and development. We did that throughout
the war.
The fourth lesson is the reliance on allies and partners.
Senator Reed, you mentioned INDOPACOM and the China threat. DOD
uses the word ``the pacing challenge.'' I think it is actually
much bigger than pacing, but it is the threat, but it is not
the only threat, and I think the big difference between even
the cold war as well as World War II is the changing nature of
the threat and the much more complex nature of that threat.
Allies and partners are a key piece to this.
Then the fifth lesson, I think--and we did not really learn
this lesson very well through the Reagan buildup--is
mobilization is much more than just defense and much more than
the defense industry. It is the whole nation. You mentioned
workforce, sir, and we have got a shortage of workers. We have
kind of come out of that bathtub from COVID where we had twice
as many vacant jobs as we had people looking for work. But
throughout the industry, both in the production end and in the
services and sustainment end, we have got a shortage of workers
today that is continuing going forward there.
So those are five lessons I think that would be useful for
this Committee to undertake. My one suggestion to you is I
think it is time--and I do not think you have time to wait--I
would suggest that this Committee direct DOD to do, between now
and the time you go to conference, a full-blown exercise of,
say, what do our mobilization requirements really look like,
what is the scenario on which we base that. You need that as a
Committee before you finalize the fiscal year 2026 National
Defense Authorization Act.
With that I will--I have got negative time to yield back,
so I do not actually have any time to yield back, but I stand
ready for your questions.
[The prepared statement of Mr. David J. Berteau follows:]
Prepared Statement by David J. Berteau
Chairman Wicker, Ranking Member Reed, Members of the Committee:
thank you for the opportunity to appear before you today to talk about
Defense Mobilization in the 21st Century. I'm David Berteau, President
and CEO of the Professional Services Council, but I appear before you
today in my personal capacity. I have a bit of history on this topic,
and my comments and suggestions today are my personal views.
Oftentimes, the starting point for discussion about defense
mobilization is our American experience during World War II. The might
of industry was harnessed to defeat the Axis powers and secure peace.
Much has been written about that, and I suspect that the committee is
familiar with some of the historical lessons. I can go into some of
those during questions, if you desire.
cold war mobilization planning (1981-1989)
Let's look at a more recent period, the mobilization plans and
preparations during the Reagan buildup at the height of the cold war. I
was working at the center of that buildup for Defense Secretaries
Weinberger and Carlucci, and I draw some of the lessons from that time
that may be relevant for today.
The Reagan buildup during the 1980's was driven by the need to
counter the Soviet threat in Europe. We built plans for surge in the
event of conflict and for mobilization in the event of protracted
conflict. Importantly, the Department of Defense programmed money--and
included it in the President's budget requests--to support those plans.
Because we had a solid, programmatic basis for those funding requests,
Congress appropriated funds in the billions of dollars.
How did we justify that? The executive and legislative branches
held a shared view on the fundamental threat: a Soviet invasion of
central Europe through a geographic feature known as the Fulda Gap in
Germany. We had a clear understanding of Soviet forces, capability, and
intent. We built our force structure to respond to that threat. We
exercised, not on paper, but in the real world--deploying, sustaining,
and training U.S. armed forces to demonstrate our ability to respond to
an invasion. These exercises enabled us clearly to identify shortfalls
in weapon systems, munitions, material, logistics and support
(including port capability on both sides of the Atlantic), personnel,
and training. We worked to address those shortfalls through investments
in excess capacity in manufacturing and production, in stockpiling
parts and supplies, and in aligning repair cycle times with crew
training cycles. We bought, assembled, and forward deployed six army
divisions worth of material, equipment, and ammunition. Congress funded
these efforts because we had clear requirements that were tied to
actual operational plans and scenarios. Much of the funding would also
cover our needs for what we called ``leaser included cases,'' meaning
wars of smaller magnitude than the Soviet invasion of Europe.
Today, it is much harder for us to replicate what we did in the
1980's. The threats are broader, deeper, and vastly more complicated,
including cyber-and space-based threats that are unconstrained by
geography. The basis for devising requirements is not a single
overwhelmingly prominent scenario against which we would plan for surge
and mobilization. Instead, we develop a range of sometimes redundant,
sometimes overly specific requirements based on multiple scenarios. Yet
to my knowledge, DOD does not have a set of scenarios on which everyone
agrees we should base the demand, the needs, the requirements, for
near-term surge in the event of conflict and longer-term mobilization
for protracted conflict.
In other words, the first lesson from cold war mobilization plans
in the 1980's is the need for a comprehensive and agreed-upon set of
scenarios on which to base those requirements. These scenarios must
include the full panoply of threats.
The second lesson of my cold war experience is that demonstrated
capability is the surest form of deterrence. It is vital to have more
than just paper plans in place. In those days, we demonstrated, with
real world exercises and deployments, the capability to deliver on
those plans. Of course, those demonstrations might fall short of what
we really needed in some areas, and I suspect the Soviets could see
that as well as we could. However, the best way to justify the
necessary expenditures to address shortfalls was to prove them. That's
what annual exercises did.
The third lesson is the fundamental need for the government to
partner with industry. That partnership must include long-term
contracts, including stable designs that can maximize production rates
in parallel with the ability to incorporate innovations and new systems
and processes. Based on requirements, DOD must identify and fund needed
excess capacity. This partnership relies on mutual trust, with each
partner living up to its contractual commitments, including timely
payment of invoices.
The fourth lesson is the essential importance of allies and
partners around the world. Those partnerships depend upon being able to
train, exercise, and ultimately fight together. There is no substitute
in this area for a common set of assumptions about scenarios and for
actual real-world practice.
The fifth lesson, one to which we paid little attention at the
time, is that mobilization is far more than a Defense Department
undertaking. True national mobilization, such as America has only
experienced twice in our history, involves the entire national economy.
In my memory, DOD just assumed that would happen. We never actually
practiced it.
lessons for today
What do those lessons mean for today and the coming decade?
Today's threats are different, more diverse, and harder to respond
to. They include space and cyber threats and asymmetric responses to
the deployment, use, and sustainment of U.S. and allied forces. In a
report to DOD in 2012, I studied the force posture requirements of the
so-called ``pivot to Asia,'' and America was not then-and I suspect is
not today--ready to sustain a long-term conflict across the Pacific.
Complications might well arise in the form of conflict in Europe, on
the Korean peninsula, in the Middle East, or elsewhere.
To me, the most important task that I draw from those lessons is
that the Nation needs a clearer understanding of what mobilization
requires. What are the demands? What happens if we don't meet them?
I suggest that this Committee immediately require DOD to undertake
a comprehensive mobilization wargame, one that assumes the full array
of current and emerging threats, including truly contested logistics in
theater and around the world. The Committee could require that the
output of that wargame be a comprehensive, prioritized summary of needs
that are more than simply a list of stockpiled munitions or increased
production rates from weapon systems. The list of needs should also
include requirements for logistics and support, fuel resupply,
sustainment and repair, operational flexibility in theater, personnel
and training, and the impact of attrition from enemy forces.
The list of needs should also address steps needed to maximize the
integration of government and industry. Among those needs are
improvements in the DOD acquisition system for all companies and a
focus on outcomes, including faster times to delivery of results.
I suggest that the Committee direct such an undertaking be done
now, with the results provided to the Committee in time to incorporate
into conference negotiations for the final fiscal year 26 National
Defense Authorization Act. That timetable can help ensure your ability
to respond in this next bill rather than waiting another year.
Chairman Wicker, Senator Reed, I think you again for the
opportunity to join you today. I have much more that I'd like to cover,
and I look forward to your questions. Thank you.
Senator Fischer. Thank you, Mr. Berteau.
We will have 5-minute rounds, and I will begin with
questioning.
I strongly believe the Administration should maximize its
use of the Defense Production Act. They have the authority to
address challenges in our defense industrial base. However, I
am concerned by the expanding definition of what qualifies as
national defense. For example, in 2022, President Biden invoked
the Defense Production Act to ramp up domestic production of
clean energy technologies.
Dr. McGinn, how should the Defense Production Act be used
for defense mobilization? Should the DPA investments be focused
on areas clearly related to the national defense of this
country?
Dr. McGinn. Thank you very much, Senator Fischer. Yes, the
Defense Production Act is an incredibly powerful tool, and it
is best used for national security defense purposes, and that
is how it has been used during the development of the MRAP
[mine resistant ambush protected vehicle] during the
Afghanistan and Iraq war, that is how it was used during COVID,
and that is how it is being used to rebuild our defense
industrial base in areas such as rare earth processing,
castings and forgings, and the like, specialty chemicals.
So that is how it is best used, and the more it is focused
on national defense, it is not a political issue. Therefore, it
is a national security issue.
Senator Fischer. Thank you, and Dr. McGinn, how should the
Act be used for defense mobilization? Should the investments be
focused on areas clearly related to being able to get that
done? I'm sorry, Dr. Michienzi.
Dr. Michienzi. Thank you. I just wanted to make sure. Yes,
it should absolutely be focused on mobilization efforts, but
some of the efforts that DPA is funding now, it is difficult
sometimes to realize that those go toward mobilization. So
things that Jerry mentioned such as rare earth processing and
critical chemicals.
Senator Fischer. Would you look at any statutory changes,
to be able to make it work and make it identify truly what is
national defense? Is there anything we need to be looking at
here?
Dr. Michienzi. I think making sure that it is centered on
national defense issues and national security is critically
important, as Dr. McGinn mentioned, because we do not want to
dilute the efforts of the DPA that are being very successfully
used currently and can be used going forward.
Senator Fischer. Okay. Thank you. Dr. McGinn, on January
2024, the Department released its first National Defense
Industrial Strategy, and later, in October, released an
implementation plan. What is your assessment of the strategy?
Dr. McGinn. Well, I think the strategy did a very good job
at kind of bringing together a lot of efforts that have been
led across recent administrations. One of the interesting, good
things about this area is it is very bipartisan. There have
been a lot of similar themes being addressed across the Obama
administration, through the Trump administration first, through
Biden, and today.
I think the strategy did a good job at identifying the
progress that has been made but also setting a vector for the
future. I think there were a number of good things in that
report. I particularly liked the focus on the importance of
production as well as the importance of working with allies and
partners. The key will be kind of how that is instantiated in
the 2026 budget submission.
Senator Fischer. Are there any additional areas that you
would recommend the Department would consider that maybe we are
lacking from the previous strategies?
Dr. McGinn. Yes, I think two things I would recommend. One
is mobilization. It is mentioned briefly in the strategy, but
there is no talk about restarting mobilization planning. There
actually are program elements in the Army, Navy, Air Force, and
Marines for mobilization, but they are really all about
prepositioning equipment and the like. There is no kind of
planning function that is being done today. That all stopped,
and that needs to be restarted.
Then the other area, the strategy talks a lot about
building exportability in systems, that is building systems so
that we can share them with our partners and allies. That
requires investment, because you are going to have different
capability levels of different missiles, going to different
partners, depending on how close they are. So that requires
investments on the front, and if that is a big priority, that
needs to be invested in, in terms of making exportability a
priority in acquisition and also investing in the technology
needed to build that capability.
Senator Fischer. Thank you. Senator Reed, you are
recognized.
Senator Reed. Thank you very much, Senator Fischer. First,
let me commend you all on excellent testimoneys. Thank you.
Thank you very much.
Mr. Berteau, we have seen a lot of chaotic initiatives over
the last several weeks, significant cuts of workforce, we have
seen funding cuts that do not seem to be organized, and tariffs
in place on Canada and other countries who presumably we would
like to see work with us.
Can you indicate or give an idea about the impact on these
decisions with respect to mobilization of our industrial base?
Mr. Berteau. Senator, let me think out loud with you a
little bit on that, because I do not have a prepared script to
answer that question. This is my eighth transition of one
President to the next. My first one was President Carter to
President Reagan, and every administration needs to, and does,
undertake to make sure that the programs and projects across
the Federal Government are in line with their priorities, and I
think that is a lot of what is underpinning the efforts we have
seen underway. It is being done differently than many have
done, and one of the differences is stopping things while you
are reviewing it rather than keep going while you are reviewing
it.
I think from a governmentwide point of view, this has
caused a bunch of hiccups, but more importantly, there is a
second element of that review, and that is do not just focus on
the things you are going to stop, the money you are going to
save, the reductions in workforce, unnecessary workforce, that
you are going to do, and so on. You also have to focus on what
you want to not only keep going but go further and faster. I
think one of the things that we are trying to focus on is what
are those areas. Clearly national security is a huge piece of
that. Border security is another one. There are probably others
that will emerge as part of that process.
So I think my personal concern is that you need to actually
undertake those places you are stopping or reducing or
realtering and keep in mind you need to be able to keep the
capacity and capability and competence in the government
contractor community to be able to work while you are going
forward. That is the touchstone, I think, that I would advise
this Committee to look at it for.
If I could add one thing on the DPA.
Senator Reed. Yes, sir.
Mr. Berteau. It is up for reauthorization this year. It is
obviously not the jurisdiction of this Committee. I have been
through two DPA reauthorizations, including one in 1990, where
we actually let the Act expire under a veto threat because it
got loaded up, Senator Fischer, as you indicated, with a bunch
of things that did not really, from our perspective, contribute
to national defense, and we let the Act expire. That is a
dangerous time to do it. Saddam Hussein had just invaded
Kuwait, and we did it, but it turned out there were other
authorities we could use, for a short-term conflict such as
that.
I do think this would be important, and input from this
Committee might be useful in that reauthorization in terms of
looking not only at how the DPA has been used over the previous
years but how it has not been used, and where you ought to view
it. I agree with Dr. McGinn in terms of Title VII. DPA worked
for me for a number of years. I exercised Title VII authority a
number of times, and I think it really needs a refresh, because
the nature in which DOD would use that authority today, in
today's global economy, is very different than it was in the
1980's.
I am sorry for that sidebar, but I think that is an
important think for you guys to look at.
Senator Reed. Thank you, sir. Your comments, Dr. McGinn. We
are running out of time, so if you could, with respect to the
present sort of turmoil that we are witnessing and the impact
on the industrial base.
Dr. McGinn. Well, companies that support the government
play critical roles in lots of different functions. The big
thing that I am recommending is the importance of us restarting
mobilization planning. That is not going to be impacted because
it does not exist today.
So that is something that has to be developed and is
inherently a governmental function.
Senator Reed. Thank you very much. Dr. Michienzi, we are
much more reliant upon information technology and software-
based systems today than we were certainly in World War II and
other periods of mobilization. When it comes to planning and
preparing for industrial mobilization, how does this reliance
change the situation?
Dr. Michienzi. Well, luckily software and software systems
have been, I would say, more adaptable than some of the
hardware systems, as DOD tries to move forward. So they do
things like agile acquisition, you know, refreshes and upgrades
quite quickly.
So I think software is absolutely key to any mobilization
effort because that is what is controlling all of our command
and control, for instance, C4ISR [Command, Control,
Communications, Computers, Intelligence, Surveillance, and
Reconnaissance]. So yes, it is absolutely essential.
Senator Reed. Thank you very much. Thank you, Madam
Chairman.
Senator Fischer. Thank you, Senator Reed. Senator Rounds,
you are recognized.
Senator Rounds. Thank you, Madam Chair. First of all, thank
you to all of you for being with us here today. We appreciate
the time that you are taking from your schedules.
For all of you, the fiscal year 2025 defense bill includes
a provision from my office, Section 1074, a report on
operational plans of the Department of Defense, which requires
an assessment of the operational plans of the DOD in the event
of multiple, concurrent contingencies or protected conflicts.
This requirement reflects the reality that in the event the
U.S. engages in hostilities with China, other adversaries, such
as Russia and Iran, will press their own advantage in Europe,
the Middle East, and elsewhere. Basically talking about if we
have a conflict, we are going to have a conflict in more than
one area or one theater at a time.
What are some of the considerations that we must take into
account when talking about a multi-theater mobilization, and
what are some of the key shortfalls that you believe the
Department should identify and highlight in their assessment?
Dr. Berteau, would you like to begin?
Mr. Berteau. Thank you, Senator. Let me again go back a few
years. At the time of the cold war, we really only had one set
of scenarios that we cared about, and that was the Soviet
threat in Europe. Everything else was considered to be what we
called a ``lesser-included case.'' That means whatever force
structure and capability we would have to counter the Soviet
threat would probably be sufficient to counter any other
threat.
After the end of the cold war, we changed that to several
different iterations from a planning process point of view,
including a two-war scenario, that essentially being the Middle
East and Iran, Iraq, and the Korean Peninsula. It turns out,
after 9/11, we discovered that lesser-included cases might be
lesser but they were not included, so we had to have a big
shift in terms of both our strategy and our force posture to
deal with that.
In 2012, I was charted by DOD to do the first assessment of
what the force posture would be needed for the pivot to Asia,
and what I discovered is there was no basis for that. Again,
this was a greater not included, rather than a lesser included.
So I think if you look at that evolution over time, the
request of your provision is a very valuable and timely
request. But it is important to note that that is only where we
are today. So from the operational plan point of view it really
focuses, from a combatant commander's point of view, of if I
fight today, if I have to fight tomorrow, what do I have, what
do I do, how do I use it, how do I sustain it, support it, et
cetera.
I think it needs to be much broader than that, of what is
it in day 50? What are the lessons from Ukraine and almost
every war we have entered in? It may look like it is going to
be short at the beginning; it keeps on going. So where are you
at day 700? I think that is another element that is useful to
add on there, sir.
Senator Rounds. Thank you. Dr. McGinn?
Dr. McGinn. Thank you, Senator. Yes, thank you very much
for that provision. I think that is important to really focus
on operational plannings. But one of the things that is missing
in most operational planning is the role of industry. One of
the things that we saw when supporting Ukraine is the challenge
of production, that we have got to really kind of be able to
ramp that up, and that requires really close government-
industry collaboration.
During the cold war we had these voluntary agreements that
created integrated committees, that were focused on the
production of 155 munitions, that were actually non-FACA
[Federal Advisory Committee Act] boards that allowed for close
collaboration between government and industry on production
issues.
So that needs to be part of the planning. We need to do the
war games that have that, because you have seen the war games
where if we have a Taiwan Strait scenario, we are out of
Schlitz in 2 weeks on munitions.
So we have got tremendous kind of industrial implications
to these operational scenarios that have to be part of the
planning going forward.
Senator Rounds. Thank you. Dr. Michienzi?
Dr. Michienzi. Real quickly, I will just add that the
National Defense Strategy drives how the Defense Department
looks at operational planning. So the current National Defense
Strategy stays focused on China. Previous National Defense
Strategies did include multiple conflicts at the same time and
looking at that from an operational planning perspective. So
National Defense Strategy would be helpful here if we are going
to really, truly look at that.
I do want to mention some of the impacts, though, are the
types of munitions that we are going to use. In Ukraine, we are
fighting mostly a ground war, so we are using a lot of
artillery, mortars, things that we are absolutely not going to
be using in a China fight. In a China fight we are focusing
more on service launched, air launched long-range missiles. If
we now have to add in another fight, say Korea, we are back to
a partial ground war.
So it really matters which fights we are looking at as to
which parts of the industrial base we are trying to ramp up.
Senator Rounds. Thank you. Thank you, Madam Chair.
Senator Fischer. Thank you, Senator Rounds. Senator King,
you are recognized.
Senator King. Madam Chair, congratulations on your meteoric
rise to the chairmanship. [Laughter]
Mr. Berteau, I was really interested in your approach
during the Reagan years of defining the scenario and then
defining the strategy to meet it. Isn't that what is done now?
I would assume that is exactly what is done. Or is it being
done in too broad a sense without focusing on particular
scenarios that would require a particular response?
Mr. Berteau. So I should probably clarify my use of the
words. So you have an operational plan which, from my
perspective in history, is the today fight, with the forces
today and the theaters they are in.
Scenarios can go beyond that, both in terms of time and in
terms of geography. What we had in the cold war was almost no
difference between the operational plan in the fight today and
what the long-term scenario would look like.
Today, as we just heard in the discussion in response to
Senator Rounds' question, we have a wide variety of potential
conflicts that could arise. In addition, we have got----
Senator King. But still, shouldn't we, within that wide
variety we should try to choose the most likely. You cannot
just throw up your hands and say, ``We have a very complex
situation, and therefore we can't have a specific response.''
Should we not we be saying, ``Okay, this is the most likely
scenario, and that is what we should be preparing for''?
Mr. Berteau. I think you are right, sir. You need to figure
out what you are going to base your requirements on and what
you are going to spend your money on, and what comes first. You
have to have a mechanism for prioritization. I think it is
probably a combination of likelihood and probability, and I am
certainly not qualified to put those on there.
But it is also a question of where are the greatest
stressors, and what are the vulnerabilities if we cannot meet
those stressors. That could, in fact, require an integration
across multiple scenarios to look at what is the aggregated or
combined impact and effect and where are the greatest things
where we need to put our resources first. We will never have
enough money to do everything, so the question is where do you
put it first.
Senator King. The likelihood. A very quick, easy question
for everybody. Can we all agree that continuing resolutions
absolutely are not part of the solution to this problem?
Mr. Berteau. Franklin Roosevelt did not face a single
continuing resolution through the entire buildup to World War
II and the execution thereof.
Dr. McGinn. Yes, I concur.
Senator King. All of you agree with that, and, of course,
that is one of the difficulties that we are in now, and it
creates all kinds of downstream effects with regard to the
industrial base and preparation and everything else.
Thank you for that. Let the record show continuing
resolutions are not the way to do business, particularly in the
defense area.
All of you have mentioned something very interesting, which
is allies are part of the solution, and it concerns me that we
seem to be embarked on a course that at least is not
encouraging to our allies, and in some cases is definitely
poking our allies in the eye. Talk to me about the importance
of allies in dealing with the production necessary for a
significant conflict, whether it is Japan, the U.K. [United
Kingdom], Canada, or other countries.
Dr. McGinn. Our allies are important, sir, a key part of
our industrial base, and we have a number of agreements and
collaborative programs. I mean, the largest fighter program in
the world, the F-35, we have a dozen partner countries, I
believe.
Senator King. So we cannot do this by ourselves. Is that a
fair answer?
Dr. McGinn. That is correct.
Senator King. All of you are nodding. Could you say yes,
because nods do not show up in the record.
Dr. Michienzi. Yes.
Mr. Berteau. Nods do not show up in the transcript either.
Senator King. Exactly. One of the problems is the
consolidation within the defense industrial base. How do we go
about expanding the options available? One suggestion we had
from one witness earlier was to go to major manufacturing
facilities, Ford Motor Company, for example, and getting them
engaged in military production as well as making F-150's. How
do we expand the industrial base? Everybody comes here and says
we need to expand the industrial base. Give me some practical
suggestions as to how that might happen.
Dr. McGinn. Senator, it is a great question, and I think,
one, we have to recognize the consolidation of the industrial
base that people talk about, it is largely a function of
spending. During the cold war, during the 1980's, when Mr.
Berteau was in the Pentagon, we were spending 5.5, 6 percent of
GDP [Gross Domestic Product]. Now we are spending around 3. So
you are going to have less companies in the overall system.
Then something that Dr. Michienzi mentioned is that when
your acquisition is focused on efficiencies, you want to buy
the right system, for the right time, and what that ends up
with is very limited production runs and/or production runs
that last for, you know, when you have platform programs like
the F-35, the Bradley fighting vehicle, the Abrams tank, they
last for 40 years. So you have a prime contractor that has that
market position.
So my argument is that we have to change how we buy, which
means buying more systems, buying from multiple sources, and
you can do that very much with unmanned systems. With some of
the platform systems you can do that, as well. There has been a
lot of work done on second-sourcing back in the 1970's and
1980's, where we were buying munitions from two suppliers and
that reduces costs.
So there are ways you can increase competition by changing
your buying approach, and that has to get away from some of the
efficiency focus and more on what capabilities and capacities
do we need.
Senator King. Well, and one of the particular things that
ought to be part of this is modularity, so that you can upgrade
without having to upgrade the entire platform.
Dr. McGinn. Madam Chair, would you indulge me for one
sentence? We just do not buy enough to keep more companies in
business. We just do not buy enough. The reason we only have
2\1/2\ manufacturers of tactical missiles is we only buy enough
to keep 2\1/2\ companies in business.
Senator King. Thank you. Thank you, Madam Chair.
Senator Fischer. Thank you, Senator King. Senator Sheehy,
you are recognized.
Senator Sheehy. Thanks for appearing today. Mr. Berteau,
you talked about the World War II construct obviously with
regard to revisioning of product specifications and how we
evolved that.
I share the same concern, though, with regard to the
customer has created this problem, i.e., the Pentagon has
created this defense consolidation and the brittle supply chain
we have. I am not confident that the government can be the
solution to it either. How do we incentivize the industry, free
market solutions, to actually create a resilient and
diversified supply chain, rebuild the industrial base in a way
that's resilient for a sustained conflict.
Because during World War II, Japan and Germany had a very
centralized defense acquisition ministry, specified everything
from on high, and tried to control the entire process from A to
Z. That worked very well early on, but it could not keep up
with the sheer quantity required, and there is a certain amount
of quality in quantity. So that strength, for us, came from the
free market. It came from private companies, working in
coordination, of course, with the government.
But how do we take defense base that has largely been
atrophied to the point of almost non-existence for quantity-
level manufacturing, and how do we incentivize the free market
to outpace the government in fixing this solution?
Mr. Berteau. Thank you, Senator. There are two ways to
approach that. When I got to the Pentagon, there is this famous
chart, if we went from 51 prime contractors down to 5. When I
got to the Pentagon, all 51 were there. Why did they go away,
during a buildup in which we were doubling the size of
procurement and research and development expenditures in DOD?
They went away for three reasons. No. 1 is even with those
more dollars, there was not more quantity to buy. Second is we
began to put more and more regulations on top, the compliance
regulations. I am working on, and I will be glad to provide it
to the Committee when I am finished, a comparison of the
compliance requirements that a government contractor has, not
just defense contractors but any government contractor, and
what happens in the private sector. It is a list of at least 15
or 20 things that cost more, take time, and do not really
improve results, in my opinion. I think that is an important
piece of it, as well.
Ford Aerospace, Fairchild Industries, Sperry, Bose, GM
[General Motors], they all went out of the defense business, in
the middle of the buildup, because it was, two things. It was
no longer--time, value, money in the private sector is way
different than the time, value, money in DOD. So the returns
were not there. The opportunities for better returns elsewhere
were there.
So you have to be able to counter that with government
policies and programs that offset that risk-reward basis that
the financial market is always looking for. I think that can be
done, but that is not the path we are on right now.
Senator Sheehy. So for any of you who choose to answer,
then, how does the government remove the bureaucratic red tape
that really creates the sclerosis in the acquisition chain,
that disincentivizes companies from wanting to do business with
the Pentagon, that we do not have to have SpaceX and Palentir
sue the government to buy a solution that is better for the
warfighter. That is what has been going on. A better solution
could be sitting on the shelf, but since it does not comport
with a dizzying array of byzantine regulations, either it is
not purchased or that company has to sue the government to give
the warfighter the equipment they need. So how do we change
those regulations, quickly, internally, so people want to do
business and want to support the warfighter?
Dr. McGinn. Yes, great question, Senator. I would start,
again, what is unique about the government contracting system
is it is a monopsony. You have one buyer or different sets of
buyers. They can set the market.
So the power is in the hands of the government or the
Department of Defense to change incentive structures, because
companies--private companies, public companies--they respond to
incentives. So the onus is on the Department to change those
incentive structures, and Congress can help here, and a couple
of ways that we can do that, that will create more
opportunities for companies across the spectrum, is to bring
the power of our capital system that you allude to, to bear.
Because if we want to build factories in advance of need, that
can be done through the government investing, but we are not
going to be doing any more big CHIPs bills, that kind of
government investment.
But if you incentivize companies and create offtake
agreements or financing programs that enable them to make a bet
at below market rates, like the Department of Energy has, and
builds off what the Office of Strategic Capital is doing, that
is how you get lots of money, which is there, the private
equity and venture capital money, to invest. That will help
build capacity and build competitors for the Dept.
Dr. Michienzi. Can I just add one quick thing? I think
there also needs to be a recognition of risk acceptance in the
Department. Contracting officers are personally liable for if
something goes wrong with the contracting. Program managers are
promoted if they produce things and nothing goes wrong.
So there is a very low risk tolerance in the Department,
and I think that contributes to the fact of not introducing new
supplies, not wanting to change things, not wanting to bring in
new industries. So I think there needs to be that piece of it
that accounts for it, as well.
Senator Sheehy. Thank you. Quantity, iteration, and speed
are key, and what won World War II for us was not the
capability of our technology. It was our ability to build lots
of things fast and get them in the hands of our warfighter, so
we have got to get back to that. Thank you.
Senator Fischer. Thank you, Senator Sheehy. Senator Kaine,
you are recognized.
Senator Kaine. Thank you, Senator Fischer, and thanks to
our witnesses.
My concern about mobilization is heavily on the workforce
side, and I think maybe because I am on the Health, Education,
Labor, Pension I look at a lot of things through this workforce
angle. But also in my dialog with our shipbuilders and ship
repairs in Virginia and elsewhere, I am very, very nervous
about us not having the workforce we need.
I think this is sort of a long-term problem with birth
rates declining, and they are not going to change immediately,
and if they did we would not see it for 25 years. So I think
there are some big picture solutions like a workforce-based
immigration reform that we are going to have to grapple with to
get this right.
But I would love it if each of you could just address
workforce strategies to help us with mobilization, and maybe
even include workforce strategies that we could do jointly with
allies. I will start with Mr. Berteau, because I know you
talked about workforce in your opening statement.
Mr. Berteau. Thank you, Senator Kaine. A lot of what we
have already talked about has an impact on that, but I think
there are two additional points that I would like to make here.
One is, in fact, the impact of COVID and both the inflation and
general costs and the increasing costs of labor over the last 5
years.
Many defense companies, and many other contractors in the
rest of the Federal Government have bids that were put in
place, accepted by the government, and contracts currently
underway, that made assumptions about zero percent interest
rate, very low inflation, a balance between job vacancies and
those seeking to work, so a stable workforce, low unemployment.
None of that is true over the last 5 years.
Many of those contracts have not been adjusted. In fact,
DOD is still issuing contracts today with an annual inflation
clause of somewhere 1 or 1.2 percent, both for workforce, for
wages and benefits, and for other costs associated with that.
That is not only unrealistic, it leads companies to bid
proposals that are inexecutable in the end.
What have we done about this? This Committee actually put
some language in a couple of years ago in the NDAA--I think it
was 3 years ago now--that gave the Defense Department the
flexibility, where funds were available, to offset some of
those costs. We have seen very little effort on the part of the
Defense Department to look at those economic price adjustments
come into play.
What is the result? You know this. You have got a starting
welder salary at a shipyard, or even after a year of
experience, that is substantially less than what that person
can make at Walmart or Costco--not standing out in the cold or
the heat. I mean, welding is an honorable profession, but it is
hard work. I am not saying being a warehouseman at Costco is
not hard work, but it is a lot easier on the body.
So we have got to offset some of that or else we are never
going to climb out of this hole.
Senator Kaine. Could I ask Dr. McGinn and Dr. Michienzi.
Dr. McGinn. Yes, thank you very much, Senator. I think one
of the strengths of the workforce, the defense industrial base
workforce, is the nature of the business. Unlike commercial
industries, we generally have longer-term contracts, 5-year
contracts, or 1-year with four options, that enables stability
in the workforce. It enables companies to plan for the future.
However, when you have continuing resolutions, as Senator
King mentioned, and you have stability in budget, it makes it
harder for companies to do that. So the more that Congress and
the Department can create stable demand signals--and that is
through things, like I mentioned, if you do purchase
commitments for certain capabilities that you need, or you do
multiyear procurement contracts, that enables kind of the
stability to grow and stabilize workforce.
Senator Kaine. Great. Dr. Michienzi, you have got a minute
15, but the Chair may let you go just a little bit longer.
Dr. Michienzi. Okay, thank you. It is a great question, and
I have been involved in this very much as we have been scaling
up production for Ukraine and other obstacles.
You know, the quickest way to scale up is to increase
capacity, if you are not already operating at full scale. But
you need people for that, and it was always an issue to get the
people, even if you had excess capacity, getting people to come
on board to observe that excess capacity was difficult.
A lot of it has to do with areas that these plants are
located in. By design, they are in rural kind of areas that are
not near exciting cities, so young people do not want to move
there. So I think things that can build infrastructure and make
those places better for young people and make them want to go
there and want to stay would be helpful.
It also goes to, when we were growing up we wanted our kids
all to be engineers, right, not technicians. That was not
considered a valued job description. So we need to make being a
technician exciting, and there are some efforts in the
Department to do that. So make sure that they understand that
what they are doing is important, it goes direct to the
warfighter, et cetera.
Last, for allies, I have done a lot of work in that area. I
was the lead for the Guided Weapons Explosive Ordnance Program
with Australia. One of the things that we had proposed was, as
they were trying to ramp up their capacity to make munitions in
Australia, which they have not done in a long time, bring some
of their folks over to train here and fill some of the
workforce shortages that we had here, so it is a win-win. That
is something that we should pursue.
Senator Kaine. Which is sort of what we are doing with
AUKUS [Australia, United Kingdom, United States] a little bit.
We have Aussie shipbuilders and sailors here, training with us,
so they can go back and do the same thing.
Dr. Michienzi. We need to do more.
Senator Kaine. Yes. Thank you very much. Thanks, Senator
Fischer.
Senator Fischer. Thank you, Senator Kaine. At this time I
would like to ask unanimous consent to enter Chairman Wicker's
prepared statement into the record.
Senator Fischer. This concludes today's hearing. I would
like to thank the witnesses for their testimony, and we are
adjourned.
[Whereupon, at 10:29 a.m., the Committee adjourned.]
[Questions for the record with answers supplied follow:]
Questions Submitted by Senator Tom Cotton
defense production act
1. Senator Cotton. Dr. McGinn and Dr. Michienzi, the Defense
Production Act (DPA) is one of the most important tools the Department
of Defense (DOD) possesses to revitalize our woefully inadequate
defense industrial base. Yet, DOD has historically struggled to
effectively utilize the program, and the previous administration used
DPA to fulfill non-critical priorities instead of defense needs. How
should we reform the Defense Production Act to better suit DOD's needs?
Dr. McGinn. DPA is indeed a very powerful Presidential authority.
As I noted in my testimony, I believe that it is critical ``to keep DPA
focused exclusively on essential defense and national security issues,
in particular threats from China.'' \1\ I also proposed some specific
recommendations to strengthen the DPA for the future:
---------------------------------------------------------------------------
\1\ John G. McGinn, Testimony on Defense Mobilization in the 21st
Century, U.S. Senate Committee on Armed Services hearing, March 6,
2025. Available at https://www.armed-services.senate.gov/hearings/to-
receive-testimony-on-defense-mobilization-in-the-21st-century (accessed
May 12, 2025).
DPA Title I--Update executive orders and regulations. At
the national level, the DPA is governed by a number of old and
overlapping executive orders spanning numerous administrations that
need to be refreshed and simplified. The Trump Administration should
conduct a thorough review of relevant executive orders and regulations
to better orient DPA policies and practices to address future national
security challenges. \2\
---------------------------------------------------------------------------
\2\ Jerry McGinn and Daniel Kaniewski, ``Where does the Defense
Production Act Go from Here? Key aspects need strengthening,'' Defense
One, November 24, 2020. Available at https://www.defenseone.com/ideas/
2020/11/where-does-defense-production-act-go-here/170301/ (accessed
April 11, 2024).
DPA Title III--Delegate determination authority and use
purchase commitment authority. Title III is a tremendous tool for
building industrial capacity. The non-delegable requirement for the
president's signature on each DPA determination, however, has
significantly slowed the process by which DPA projects are developed
and executed. Allowing the delegation of that determination in the
upcoming 2025 reauthorization of the DPA, perhaps to the Secretary
level of those agencies with Title III authority,\3\ would
significantly streamline the development of Title III projects.
---------------------------------------------------------------------------
\3\ Currently DOD, the Department of Homeland Security, the
Department of Energy, and the Department of Health and Human Services
have been delegated DPA Title III authority.
Another significant improvement would be the use of purchase
commitments under Title III. All existing Title III projects are
purchases under Section 303 of the DPA, but the authority also permits
multiyear purchase commitments. Purchase commitments would allow DOD to
create a guaranteed demand signal for an industrial capability over a
mutually agreed upon period, thereby reducing risks for industry to
make their own investments.\4\ Adding several purchase commitment
projects could significantly help maintain capacity levels in areas
such as critical materials and specialty chemicals to support future
mobilization efforts. Purchase commitments, however, have not been an
option recently because Congress has appropriated DPA funds over the
past 3 years using standard Procurement funds which expire in 2 years,
contrary to traditional DPA appropriations, which do not expire.
---------------------------------------------------------------------------
\4\ Office of the Assistant Secretary of Defense (Industrial Base
Policy) briefing, Defense Production Act Title III. Available at
https://www.businessdefense.gov/ibr/mceip/dpai/dpat3/docs/DPA-TitleIII-
Overview.pdf (accessed April 11, 2024).
DPA Title VII--Relook the use of voluntary agreements and
the National Defense Executive Reserve (NDER). Two sections of DPA
Title VII have been scarcely used since the end of the cold war but
present a tremendous opportunity for future industrial mobilization.
Section 708 permits the government to establish voluntary agreements or
plans of action with industry ``to help provide for the national
defense.'' \5\ The Administration, for example, could establish
voluntary agreements to prepare stand-by industrial capacity for
potential surge use during conflict. Further, these agreements could
enable dynamic government-industry collaboration on production issues
such as that during WWII's War Production Board. Section 710 of Title
VII also permits the President to establish a NDER, a volunteer group
of industrial executives to support mobilization efforts. The
Administration should examine the utility of this authority to form on-
call groups of industry experts to serve in government during national
emergencies. The Baroni team just completed a project addressing these
two sections that can inform these efforts when published.
---------------------------------------------------------------------------
\5\ 50 U.S.C. Sec. 4558(c)(1); Section 708(c)(1) of the DPA. See
also, Neenan and Nicastro, The Defense Production Act, pp. 15-16.
---------------------------------------------------------------------------
Dr. Michienzi. The DPA program at DOD has undergone major changes
in the last couple of years that have made it much more effective than
it had been previously. They have been able to have Presidential
Determinations (required to spend DPA funds) approved that are broader
in scope to help mitigate a larger number of industrial base
shortfalls; they are able to use contracting vehicles--including an OTA
that was approved last year--and other contracting entities besides
Wright Patterson Air Force Base, which has made awarding grants much
faster. The DPA executed almost one billion dollars in grants last
year--proving that it is more efficient and effective than it was in
the past. However, even with these changes, the DPA is not as
responsive as it should/could be. A number of things could improve the
use of the DPA--in peacetime, but especially in times of conflict or
other crises.
i. Delegating authority to fund industrial base shortfalls to the
Secretary of Defense instead of the President. The current process to
staff a package to the Secretary of Defense for approval prior to
staffing it at the White House for the President's signature takes
approximately 1 year. That timeline is no conducive to being responsive
to industrial base issues.
ii. Additional funding. The DPA needs to cover industrial base
shortfalls in all sectors, so even though one billion dollars is a lot
of money, it has to cover too much. Additional funding would enhance
the DPA's effectiveness.
iii. Restoring non-expiring funding. Without this, the DPA cannot
issue purchase commitments, which is one of the most powerful aspects
of the DPA--especially as the U.S. is trying to reshore critical
industrial base capabilities. Providing grants solves the supply issue,
but the demand issue will still remain, and those investments will be
wasted if there isn't a means to bring demand to those new suppliers.
Having off-take agreements and purchase commitments is one of the best
ways to provide that demand.
iv. Although all Titles (I, III, and VII) of the DPA can and should
be used by other agencies under the right circumstances (response to
COVID-19 for instance), the funding supplied to DOD's DPA Title III
program should be used solely for defense purposes--to support
industrial base shortfalls that have a direct tie to DOD systems. If
other agencies, Congress, or the Administration wish to use DPA Title
III authorities and grants, they should acquire separate appropriations
to do so.
v. DOD should make better use of provisions of Title VII of the DPA
to 1) establish voluntary agreements with private industry to develop
collaborative plans of action for national defense, including
mitigating industrial base shortfalls--participants are granted relief
from specific antitrust laws (Section 708), and 2) establish a
volunteer pool of industry executives (National Defense Executive
Reserve (NDER)) who could be called to government service in the event
of a national defense emergency (Section 710).
2. Senator Cotton. Dr. McGinn and Dr. Michienzi, do you believe
congressional oversight of DPA would be more effective with
congressional oversight by the Armed Services Committees?
Dr. McGinn. I defer to the congressional Committees to determine
the best manner of oversight of the DPA.
Dr. Michienzi. I do not believe that there needs to be additional
congressional oversight of the DPA.
arsenals
3. Senator Cotton. Mr. Berteau, Dr. McGinn, Dr. Michienzi, while
DOD has begun to modernize its organic industrial base, it is still not
fully utilizing its arsenals and ammunition plants. Arsenals, including
the one in Pine Bluff, Arkansas, are struggling to secure funding to
modernize its facilities and boost output. How should DOD utilize
existing arsenals and ammunition plants to expand desperately needed
production capacity?
Mr. Berteau. Senator Cotton, the Defense Department's organic
industrial base consists of the maintenance and repair depots,
shipyards, arsenals, munitions assembly plants, etc. Together, these
organic industrial base components provide capacity and capability for
current operations and future needs. DOD balances its budget
investments in these areas with all the other competing priorities in a
budget request that always faces shortfalls. This Committee might
assess the soon-to-be submitted President's Budget Request for fiscal
year 2026 for those shortfalls.
There is a substantial negative impact on the organic industrial
base, including arsenals, of short-term and repeated Continuing
Resolutions. Pine Bluff will be better able to modernize its facilities
and operations if Congress passes on-time full year appropriations for
fiscal year 2026 and avoids both short-term and full-year Continuing
Resolutions.
Dr. McGinn. DOD should use the most cost-effective manner to expand
production capacity for munitions and other capabilities. Arsenals and
depots in the organic industrial base should definitely be considered
as part of that assessment by DOD.
Dr. Michienzi. Arsenals and ammunition plants have a role, but it
is not to displace commercial industry. They should be used in sectors
and for materials and components that are critically important to U.S.
national security, that are DOD unique, and where poor business cases
prevent private industry from maintaining capability and capacity. A
prime example is 155mm ammunition, which is being used extensively in
Ukraine. This is a DOD unique item that is critical for national
security, and where private industry would have right sized itself to
DOD demand (14,000 rounds a month prior to the Ukraine invasion).
Luckily, the Scranton Army Ammunition Plant that produces those rounds
had maintained some excess capacity, which allowed the Army to scale up
production more quickly than having to expand or develop a new
commercial facility. So where these conditions exist for other systems,
the organic industrial base can and should be examined as an option.
However, if there is enough demand and the item is commercial or has
commercial applications, private industry will be best suited, as they
will always be the most economical choice.
4. Senator Cotton. Mr. Berteau, Dr. McGinn, Dr. Michienzi, would
you recommend using the arsenals to establish secondary sources of
critical supply chain choke points, such as nitrocellulose?
Mr. Berteau. Senator Cotton, as this Committee and DOD continue to
work on solving supply chain problems, it is useful to consider the
potential of the arsenals to provide secondary sources of supply.
Dr. McGinn. The organic industrial base is often used to develop
capabilities that are military unique or not part of the commercial
supply chain. To that end, nitrocellulose is currently produced at the
Radford Army Ammunition Plant. Having a second source for
nitrocellulose and other specialty chemicals or materials would be
beneficial if there is a business case for its development.
Dr. Michienzi. Given the above criteria, yes--this is a good use of
the organic industrial base. DOD could split the procurement of these
items to give just enough to the organic facilities to maintain the
capability and capacity, while still utilizing mostly commercial
industry, where available. Nitrocellulose is currently produced at
Radford Army Ammunition Plant, so it may not be the best example, but
there are plenty of other examples where this would apply.
critical minerals
5. Senator Cotton. Dr. McGinn and Dr. Michienzi, can you explain
why it is so dangerous for the United States to depend on Communist
China for certain critical minerals?
Dr. McGinn. It is very dangerous for the United States to be in a
sole or single source situation with critical minerals or other
materials to a Chinese source because the Chinese government can shut
down exports of these materials at any time. In 2010, China restricted
the export of certain rare earth materials to Japan because of a trade
dispute, causing a worldwide spike in rare earth prices. \6\ Recent
rare earth export restrictions in response to increased tariffs has
further demonstrated this danger. Despite over $400 million in
industrial base investment since 2020 in the United States to rebuild
domestic industrial capacity in rare earth processing, the Chinese
still have tremendous market power in critical minerals that are vital
for commercial and defense products.
---------------------------------------------------------------------------
\6\ Keith Bradsher, ``China Bans Rare Earth Exports to Japan Amid
Tension,'' New York Times September 23, 2010. Available at https://
www.cnbc.com/2010/09/23/china-bans-rare-earth-exports-to-japan-amid-
tension.html (Accessed December 10, 2024).
---------------------------------------------------------------------------
Dr. Michienzi. Critical minerals are used ubiquitously in both
commercial and defense systems. They are used in almost everything the
DOD builds and uses, but also in military and civilian critical
infrastructure, medical devices, IT and communication equipment, and
household appliances--to name a few. China has already restricted the
exports of a number of critical minerals, including some rare earth
elements, which has DOD scrambling to examine stockpiles and
inventories and racing to expedite development of non-Chinese sources.
And it's not the mines that are the issues--the U.S. and its allies
have plenty of mines for these materials. It's the processing and
downstream product manufacture that are the issue because China
controls a large percentage of these industries. What we've seen so far
are just shots across the bow. China knows exactly where our industrial
base pain points are, and they know how to weaponize them. Taken far
enough, these export controls could cripple both military and civilian
life.
6. Senator Cotton. Dr. McGinn and Dr. Michienzi, how important is
it that we pursue other sources of critical minerals outside of China,
both domestically, and in other countries like Ukraine, for example?
Dr. McGinn. There are many sources for critical minerals outside of
China. The United States and allies and partners such as Australia,
Canada, Ukraine, and many others have deposits of critical minerals.
The key, however, is the processing and refinement of these minerals
and materials, not just the sourcing of the raw material. That is where
China has the dominant market position. Increasing the capacity of
domestic and allied sources for processing rare earths and other
critical minerals should be the priority for near-term investments in
my view.
Dr. Michienzi. Critically important due to the reasons listed
above. However, processing and magnet making should be the priorities
for DOD since there are plenty of mines for these materials outside
China.
foreign military sales
7. Senator Cotton. Dr. McGinn and Dr. Michienzi, you've discussed
the importance of sending a clear demand signal to industry so it has
the predictability it needs to invest strategically in its supply chain
and facilities. In addition to signaling U.S. demand for equipment like
munitions, how do foreign military sales play a role in sending
industry clear demand signals?
Dr. McGinn. Foreign Military Sales (FMS) and direct commercial
sales (DCS) send important demand signals to industry. FMS and DCS
often help extend the life of a military program for years after the
U.S. military stops buying them. The U.S. Army, for example, stopped
purchasing Stinger missiles in 2002, but production continued for
almost another 20 years based on FMS and DCS. Thus, when demand for
Stingers suddenly spiked in response to Russia's invasion of Ukraine,
there was a production line still in existence. Many other defense
systems, such as the F-16 fighter jet and Patriot missiles, continue in
production exclusively or largely because of FMS or DCS demand.
Dr. Michienzi. Foreign Military Sales (FMS) can augment U.S. demand
to industry for DOD systems. However, studies have shown that FMS is
not a reliable enough demand to fill the gaps created by inconsistent
DOD and congressional funding. This is mainly due to the reluctance of
foreign partners to provide information on their projected demand. Even
when DOD tries to calculate what the demand might be by including
requirements for foreign partners in operational plans, it requires
knowledge of those partners' inventories, which they also will not
provide. This leaves DOD and industry in the dark, thereby not
providing what could be a better demand signal.
__________
Questions Submitted by Senator Jack Reed
impact of workforce reductions
8. Senator Reed. Mr. Berteau and Dr. Michienzi, how do you believe
that the steep and indiscriminate workforce cuts that are being
proposed by the Trump administration will impact the Department's
efforts to plan and prepare for defense mobilization in the event of a
large scale or protracted conflict?
Mr. Berteau. Senator Reed, I believe that DOD's total workforce
(including military personnel, Federal civilian employees, and
government contractors) MUST be aligned with its requirements. The
reductions in force and employee terminations undertaken in the past
few months exhibit no assessment of such requirements or alignment with
personnel reduction goals.
In the 1980s, I managed two such efforts. First, DOD conducted the
first and only assessment of Flag and General Officer requirements.
This work resulted in a reduction of nearly 10 percent of such
officers, downgrading some to lower-level officers, eliminating many,
and even elevating the requirements for some positions. The recent
announcement by DOD of Flag and General Officer cuts have no
discernible connection to any assessment of actual requirements.
Second, under direction from this Committee, DOD conducted a full
assessment of overall officer requirements, and the subsequent report
to this Committee resulted in significant changes to DOD's officer
corps in every military department, with some increases and many
decreases.
Similar efforts for civilian employees and contractors are more
difficult to undertake, because those workforces respond to
requirements that are generated with the budget. Prudent management in
DOD would align workforce with budgeted work. The Committee will need
to assess the Fiscal Year 2026 President's Budget Request for evidence
of such alignment of work with workforce.
Dr. Michienzi. DOD will need experienced people with expertise in
multiple areas to prepare for defense mobilization. The current
workforce cuts do not seem to be strategically planned to preserve that
capability, while trying to achieve efficiencies. Developing a list of
workforce skills necessary and matching it against requirements would
make the effort more effective and still allow DOD to maintain the
people necessary.
9. Senator Reed. Mr. Berteau and Dr. Michienzi, in thinking about
that, how do you think the proposed workforce cuts to other Federal
agencies or entities that may support DOD in a whole-of-government
effort for industrial mobilization will indirectly impact DOD efforts
in this space?
Mr. Berteau. Senator Reed, in my experience, such assessments are
vitally important and take some time. Workforce reductions in other
agencies may or may not affect DOD, and this Committee should consider
such effects as it marks up the Fiscal Year 2026 NDAA. I am not aware
of any attempt at DOD or in the other Federal agencies to assess the
impact on DOD of cuts in those agencies.
Dr. Michienzi. Preparing for defense mobilization requires a whole-
of-government effort. For instance, the Department of Education to help
with workforce training, the Department of Transportation to enable
movements of people and equipment, the Department of Commerce and the
U.S. Trade Representative to help balance trade and the flow of goods
into and out of the U.S. while preserving U.S. capability. The same
strategic planning should be done at these agencies to ensure the right
skill sets and capabilities remain.
10. Senator Reed. Mr. Berteau, are there any lessons from your time
working in the Department during the Reagan administration that might
be helpful to keep in mind?
Mr. Berteau. Senator Reed, I was in charge of overall DOD manpower
requirements from 1986 through the end of the Reagan administration and
continued in that role for the first 10 months of the following
administration. The most important lessons include:
DOD needs to assess workforce requirements and reflect in
the President's Budget Request the resources needed to meet those
requirements.
DOD needs to consider the total costs of workforce in
that assessment (keeping in mind that the full cost of contractors is
known but the full cost of Federal civilians and military personnel is
hidden in other accounts and hard to determine),
DOD needs to consider the potential for surge capacity in
that assessment.
information technology issues
11. Senator Reed. Dr. Michienzi, to elaborate on my question to you
on the challenges information technology (IT) and software-based
systems pose for industrial mobilization, I am particularly interested
in how the tangled supply chain for IT products-such as
microelectronics or specialized materials-might be complicated in the
event of a protected conflict with China. For instance, we saw how
sanctions on Russia interdicted microelectronics to the point that it
impacted how the Russians produced specific weapons. How are companies
thinking about such supply chain disruptions might impact their ability
to produce systems for DOD?
Dr. Michienzi. Unfortunately, much of the supply chain that
supports IT products is global, and much of it lies in China and/or the
Asia Pacific theater. For instance, although the U.S. still leads in
the design of semiconductors, roughly 75 percent of semiconductor
fabrication and 98 percent of the packaging of those semiconductors
occurs in the in that theater. Taiwan accounts for about 60 percent,
South Korea 13 percent, and China 12 percent. Compare that to the U.S.
which only produces about 14 percent and produces NO state-of-the-art
semiconductors, which are what are primarily used in IT products.
Critical minerals, which are used in semiconductors and other IT sub-
components are also primarily processed and made into finished goods
such as IT systems in China. As we've seen with China's recent export
controls, they can cutoff supply at any time, and this has already
caused issues, with DOD scrambling to examine stockpiles and
inventories and racing to expedite development of non-Chinese sources.
Additionally, even if we are currently acquiring these things from
allied nations such as South Korea, if a conflict should start between
China and Taiwan, it will be difficult to ship anything from Asia-
Pacific theater countries. Companies should have learned lessons about
this during COVID-19, when supplies of critical items from some
countries were scarce or non-existent. And some companies have begun
looking at alternate or second source suppliers that are less risky.
However, as long as industry is profit driven and the U.S. remains a
free-market society, most of industry will use cheaper vs higher priced
but more secure sources. This is where the U.S. should use industrial
policy to combat this--something it is reluctant to do. Not using
industrial policy solutions is an adequate strategy as long as there is
a level playing field. But as we know, this is not, and has not been
the case. Many countries--and especially our adversaries--do not play
by the same rules:
i. They provide subsidies to their industries, and many are state-
owned:
ii. They encourage over-production;
iii. Which leads to dumping/flooding the market which drive prices
down;
iv. Which then drives out the competition, who cannot be cost-
competitive;
v. This captures market share--monopolizes markets;
vi. They weaponize this advantage--as China has recently with
gallium, germanium, graphite, and other critical minerals;
China has used this to great effect to capture and dominate markets
such as rare earths and lithium for EV batteries and is now attempting
to do so for semiconductors. The CHIPS Act and the export controls
Commerce has put in place for manufacturing equipment for advanced
semiconductors are examples of where industrial policy is necessary and
has slowed China down, but we will not be able to stop them. They are
currently concentrating on legacy or trailing edge chips which dominate
critical industries such as automotive, aircraft, appliances, cell
phones, medical equipment, critical infrastructure, and DOD weapons
systems, until such time as they can catch up on leading edge.
12. Senator Reed. Dr. Michienzi, are you aware if DOD in planning
for industrial mobilization is considering these sorts of supply chain
disruptions, and how might they be considering alternative or fall back
approaches for dealing with them?
Dr. Michienzi. Yes, DOD is very aware of these disruptions and has
been tracking and mitigating them well before COVID-19 surfaced them
for the general public and highlighted them for industry. OSD's office
of Industrial Base Policy has made numerous investments, through both
the Defense Production Act (DPA) Title III and Industrial Base Analysis
and Sustainment (IBAS) programs, in critical capabilities within the
U.S. where they have identified risks and issues. For example, during
the previous administration, those programs invested 8$700 million to
on-shore critical minerals mining, processing, and magnet making
capabilities. They are encouraging industry to have better visibility
and management of their supply chains, and they also work with the
Services and Congress to provide incentives for using secure (U.S. or
allied) sources vs. adversarial sources.
__________
Questions Submitted by Senator Mazie K. Hirono
trump administration's civilian workforce cuts
13. Senator Hirono. Dr. Berteau and Dr. Michienzi, one of the
biggest lessons learned from the World War II mobilization was that
labor shortages were a huge challenge to increasing production. Given
the potential for a conflict with China over the next several years, I
would like you to comment on how President Trump, Elon Musk, and the
Department of Government Efficiency's (DOGE) efforts of taking a
chainsaw to the Federal workforce impacts our ability to properly
mobilize for such a contingency, especially since we need a 2-year
personnel ramp up to be in a position to be ready in time?
Mr. Berteau. Senator Hirono, I highlighted these issues in my
opening statement and during the hearing, particularly in the exchange
with Senator Kaine. DOD workforce planning for military personnel and
Federal civilians must include consideration of the lead times needed
for such personnel to be proficient in their positions. In addition,
DOD must include such considerations in its contracting processes and
funding. Contracts that cap future compensation at rates below the
national economy make it hard for companies to compete for the workers
needed.
Dr. Michienzi. DOD will need experienced people with expertise in
multiple areas to prepare for defense mobilization. The current
workforce cuts do not seem to be strategically planned to preserve that
capability, while trying to achieve efficiencies. Developing a list of
workforce skills necessary and matching it against requirements would
make the effort more effective and still allow DOD to maintain the
people necessary. In addition, preparing for defense mobilization
requires a whole-of-government effort. For instance, the Department of
Education to help with workforce training, the Department of
Transportation to enable movements of people and equipment, the
Department of Commerce and the U.S. Trade Representative to help
balance trade and the flow of goods into and out of the U.S. while
preserving U.S. capability. The same strategic planning should be done
at these agencies to ensure the right skill sets and capabilities
remain.
information technology and software mobilization
14. Senator Hirono. Dr. Michienzi, one of the biggest differences
between the mobilization that occurred during World War II, which
focused entirely on hardware like tanks, ships, and planes, and the
present is the DOD's increasing reliance on IT and software to wage war
effectively. From a supply chain perspective, what specific challenges
and risks do you think our reliance on IT and software-based systems
poses when it comes to planning and preparing for industrial
mobilization, and what recommendations would you give DOD to address
this important issue?
Dr. Michienzi. Unfortunately, much of the supply chain that
supports IT products is global, and much of it lies in China and/or the
Asia Pacific theater. For instance, although the U.S. still leads in
the design of semiconductors, roughly 75 percent of semiconductor
fabrication and 98 percent of the packaging of those semiconductors
occurs in the in that theater. Taiwan accounts for about 60 percent,
South Korea 13 percent, and China 12 percent. Compare that to the U.S.
which only produces about 14 percent and produces NO state-of-the-art
semiconductors, which are what are primarily used in IT products.
Critical minerals, which are used in semiconductors and other IT sub-
components are also primarily processed and made into finished goods
such as IT systems in China. As we've seen with China's recent export
controls, they can cutoff supply at any time, and this has already
caused issues, with DOD scrambling to examine stockpiles and
inventories and racing to expedite development of non-Chinese sources.
Additionally, even if we are currently acquiring these things from
allied nations such as South Korea, if a conflict should start between
China and Taiwan, it will be difficult to ship anything from Asia-
Pacific theater countries. Companies should have learned lessons about
this during COVID-19, when supplies of critical items from some
countries were scarce or non-existent. And some companies have begun
looking at alternate or second source suppliers that are less risky.
However, as long as industry is profit driven and the U.S. remains a
free-market society, most of industry will use cheaper vs higher priced
but more secure sources. This is where the U.S. should use industrial
policy to combat this--something it is reluctant to do. Not using
industrial policy solutions is an adequate strategy as long as there is
a level playing field. But as we know, this is not, and has not been
the case. Many countries--and especially our adversaries--do not play
by the same rules:
i. They provide subsidies to their industries, and many are state-
owned;
ii. They encourage over-production;
iii. Which leads to dumping/flooding the market which drive prices
down;
iv. Which then drives out the competition, who cannot be cost-
competitive;
v. This captures market share--monopolizes markets;
vi. They weaponize this advantage--as China has recently with
gallium, germanium, graphite, and other critical minerals.
China has used this to great effect to capture and dominate markets
such as rare earths and lithium for EV batteries and is now attempting
to do so for semiconductors. The CHIPS Act and the export controls
Commerce has put in place for manufacturing equipment for advanced
semiconductors are examples of where industrial policy is necessary and
has slowed China down, but we will not be able to stop them. They are
currently concentrating on legacy or trailing edge chips which dominate
critical industries such as automotive, aircraft, appliances, cell
phones, medical equipment, critical infrastructure, and DOD weapons
systems, until such time as they can catch up on leading edge. Policies
should be put in place to incentivize industry to use more secure
sources, even if they are more costly. Those can be things like price
preferences for using those suppliers.
15. Senator Hirono. Dr. Michienzi, how should we think about
mobilization differently today than in the past--for example, should we
think about mobilization of different sectors of the economy, or should
we think about mobilization on a different timeframe than in the past?
Dr. Michienzi. Mobilization will definitely be different today than
it was in the past. I'm often asked, why can't we do things like we did
it in the book ``Freedom's Forge'', and I have developed a `gap
analysis that describes why we can't do that and how we should proceed
now:
The Nation has an imperative to mobilize the Defense Industrial
Base to address the increasingly aggressive threat from China and, to a
lesser extent, Russa, Iran, and North Korea. As a reference point we
can ask ourselves; ``Can we, at least in principle, do what we did in
World War II, as described in the book Freedom's Forge?'' Here is a
perspective on how we can accomplish similar objectives (i.e. large-
scale mobilization of the Nation's industrial base to deliver
affordable capacity for critical military capability) by addressing the
conditions that are very different now relative to what was happening
then.
Some key challenges we face today, relative to back then, are:
The industrial ramp up started years before the U.S.
entered WWII and was motivated by some key visionary leaders, including
the President. We need to create that vision and have it embraced by
POTUS with senior leadership assigned specifically to solve the
challenges in a manner that Knudsen was empowered to do so.
Time is of the essence and we are likely behind the
curve. To achieve the necessary transformation, we must immediately
start addressing inventory shortages for critical materials and
components and build capacity in the industrial base to produce
capability that goes well beyond what is currently available. Today's
industrial base is not resilient as a result of right-sizing itself to
the DOD ``peacetime'' demand. In other words, we must rebuild resilient
surge capacity in our defense industrial base and supply chain.
We must immediately address today's major workforce
shortages across all industrial sectors by aggressively implementing a
strategy to upskill the current population and investing in the next
generation of workers across the spectrum of essential skills. Our much
more complex systems today (e.g. precision guided munitions) versus in
WWII (e.g. gravity bombs), along with an increase in automated
manufacturing, will require leveraging and training a more highly
skilled workforce.
There were many large companies and factories that were
not operating at capacity prior to WWII, so companies were eager to
quickly repurpose that excess capacity for defense production. Today
excess capacity is much scarcer, so we will have to immediately
identify the capacity needs and aggressively build to fill the gaps.
Our current supply chain is filled with single and sole
source suppliers, many in adversarial countries, resulting in
unacceptable lead times for some items and potential for supply chain
disruption by unfriendly nation suppliers. Therefore, we must identify
specific critical supply chain vulnerabilities then onshore or `ally
shore' critical materials and components and develop multiple sources
for critical elements of our supply chains.
Many of the deals made back then were based on
handshakes, where industry went out at risk, spending their own money
until Federal funds were available. We must immediately address our
contracting environment to dramatically minimize contracting times and
develop an incentive structure that motivates industry to move out
quickly (if necessary, even before a contract is definitized), allowing
us to deliver systems aggressively while compressing schedule and
maximizing throughput and efficiency.
We must return to the paradigm that understands and
accepts developmental risk then allows for failing early to accelerate
learning and deliver capability much more rapidly.
mobilization policies
16. Senator Hirono. Mr. Berteau, following the end of the cold war
and subsequent peace dividend throughout the 1990's, a lot of the
policies, processes, and organizations focused on mobilization
atrophied or were put on the shelf. Based on your experience in the
Reagan administration, what policies, processes, or organizations from
the cold war would you suggest we go back and emulate or modify to
consider implementing now?
Mr. Berteau. Senator Hirono, I noted in my opening remarks the
following lessons from my cold war experience in the Reagan
administration:
1. We need an operational plan and a scenario on which to
calculate mobilization requirements, and from those requirements,
propose and secure appropriations for needed funding. Requirements
depend on a clear-eyed assessment of current and future adversary
capabilities.
2. We need to demonstrate the capability to deploy forces to the
theaters and to sustain those forces for a long time. This
demonstration needs to be in the real world, not on paper or in plans
alone. We did this with annual exercises in Europe that deployed
thousands of personnel.
3. We need to build a collaborative partnership with industry, not
an arms-length relationship. Industry needs to be part of the
requirements assessment and part of the demonstration of capacity and
capability.
4. We need to plan for, train and equip, and operate with allies
and partners.
5. Mobilization planning includes more than DOD and the defense
industry. It must involve all of government, the national economy, and
the forces, industries, and economies of our allies and partners.
17. Senator Hirono. Dr. McGinn, your report emphasizes the
importance of creating mobilization scenarios and exercising them
regularly--do you think DOD is doing enough in this area?
Dr. McGinn. DOD needs to rebuild its capacity to conduct
mobilization planning and exercises. As I noted in my testimony,
``Mobilization planning ended in the early 1990's. It is time to
rebuild that capacity, not only in DOD, but also in the Federal
Emergency Management Agency, the Department of Commerce, and the
Executive Office of the President. These planning efforts will greatly
improve mobilization efforts across agencies.'' \7\
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\7\ McGinn SASC Testimony.
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interagency coordination
18. Senator Hirono. Dr. McGinn and Dr. Michienzi, your report also
highlights the importance of interagency coordination in mobilization
efforts, something former President Franklin Roosevelt addressed by
appointing czars during World War II. What recommendations would you
give the current administration to improve interagency coordination in
support of mobilization?
Dr. McGinn. I believe that the administration could undertake a
number of actions to improve interagency coordination in support of
mobilization. I highlighted a number of specific recommendations in
this area in my testimony:
DPA Title I--Update executive orders and regulations. At
the national level, the DPA is governed by a number of old and
overlapping executive orders spanning numerous administrations that
need to be refreshed and simplified. The Trump Administration should
conduct a thorough review of relevant executive orders and regulations
to better orient DPA policies and practices to address future national
security challenges. \8\
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\8\ McGinn and Kaniewski, ``Where does the Defense Production Act
Go from Here?''
DPA Title VII--Relook the use of voluntary agreements and
the National Defense Executive Reserve (NDER). Two sections of DPA
Title VII have been scarcely used since the end of the cold war but
present a tremendous opportunity for future industrial mobilization.
Section 708 permits the government to establish voluntary agreements or
plans of action with industry ``to help provide for the national
defense.'' \9\ The Administration, for example, could establish
voluntary agreements to prepare stand-by industrial capacity for
potential surge use during conflict. Further, these agreements could
enable dynamic government-industry collaboration on production issues
such as that during WWII's War Production Board. Section 710 of Title
VII also permits the President to establish a NDER, a volunteer group
of industrial executives to support mobilization efforts. The
Administration should examine the utility of this authority to form on-
call groups of industry experts to serve in government during national
emergencies. The Baroni team just completed a project addressing these
two sections that can inform these efforts when published.
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\9\ 50 U.S.C. Sec. 4558(c)(1); Section 708(c)(1) of the DPA.
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Restarting mobilization planning efforts across the U.S.
Government, as outlined in my response to the previous question.
Dr. Michienzi. It will take a whole-of-government response to
mobilize for a conflict. Currently, different government agencies have
different, sometimes conflicting, requirements. An example is when a
foreign government tries to purchase a U.S. company. The transaction is
subject to review by the Committee on Foreign Investment in the United
States (CFIUS), a multi-agency process where each agency reviews the
transaction through their particular lenses. So, for example, while DOD
could consider the transaction a national security risk, the Department
of Commerce could look at it as creating jobs, which is good for the
U.S. economy. This is a real-life example of where agencies are
sometimes not aligned, and which could present large obstacles to an
effort that requires them to be aligned. For industrial mobilization to
be successful, direction will need to be provided from administration
leadership to all agencies that there needs to be alignment to the
goal, even when it may not align with the agencies' normal priorities.
contingency contracting--all witnesses
19. Senator Hirono. Mr. Berteau, Dr. McGinn, Dr. Michienzi, are
there lessons from our experiences in contingency contracting in Iraq,
Afghanistan, and during the COVID-19 pandemic that we should also look
at to consider emulating or modifying for use today?
Mr. Berteau. Senator Hirono, three big lessons from contingency
contracting are:
1. Plan for contractor support in operational plans
2. Train with the contractors that will support deployments and
operations
3. Have contracts in place and ensure funding is available.
Dr. McGinn. Our experiences during the COVID-19 pandemic are
particularly applicable today. The dramatic use of emergency Federal
Acquisition Regulation (FAR) provisions, Other Transactions Authorities
(OTs), and rapid procurement activities enabled the U.S. Government to
meet the needs of this true national emergency through approximately
$40 billion in contract obligations over 6 months. \10\ The increased
use of OTs and rapid acquisition are excellent models for continuing
use today.
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\10\ McGinn, Before the Balloon Goes Up: Mobilizing the Defense
Industrial Base Now to Prepare for Future Conflict. The Greg and
Camille Baroni Center for Government Contracting Report No. 10, October
3, 2024. Available at https://business.gmu.edu/news/2024-10/balloon-
goes-mobilizing-defense-industrial-base-now-prepare-future-conflict
(accessed March 4, 2025).
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Dr. Michienzi. Contingency contracting can be extremely helpful
during crisis periods, as the defense industrial base does not
routinely maintain excess production capacity, and it can take 6-24
months for capacity expansions to be completed. DOD has used this
effectively many times. In addition, collaboration between government
agencies can help provide more efficient contracting. During the COVID-
19 pandemic for instance, DOD played a vital role in the response from
a health perspective. Congress provided funding to HHS and FEMA to help
provide more medical resources--ventilators, masks, cotton swabs,
syringes, etc. However, neither office had the necessary acquisition
resources or training to execute that funding or use tools like the
Defense Production Act (DPA), so DOD stepped in and helped them execute
over $60 billion and helped expand production capability and prioritize
orders using DPA. The same thing happened when Commerce received $52
billion in CHIPS Act funding. This was many times the annual budget for
Commerce, and they didn't have sufficient acquisition workforce and
knowhow (for instance, they only knew how to use FAR based contracts
vs. other options such as Other Transaction Authorities (OTAs)) to
execute, so DOD stepped in--helping train them how to do acquisition
and sending personnel to help get them started while they staffed.
__________
Questions Submitted by Senator Elizabeth Warren
defense production act
20. Senator Warren. Mr. Berteau, Dr. McGinn, Dr. Michienzi, in your
written testimony you said, ``mobilization is far more than a Defense
Department undertaking.'' How does this apply in considering
reauthorization of the Defense Production Act?
Mr. Berteau. Senator Warren, the Defense Production Act (DPA)
provides authorities that have been delegated by the President to six
Federal cabinet departments: the Departments of Agriculture, Commerce,
Defense, Energy, Health and Human Services, and Transportation. In
addition, section 722 of the DPA establishes the DPA Committee (DPAC)
and provides that Committee membership includes the heads of 12 Federal
departments and four Federal agencies as well as the Chair of the
Council of Economic Advisors.
At the time that I was in charge of DPA for DOD, we held regular
discussions with and coordinated closely with the other agencies (some
more than others). Because of the paucity of separate legislation
enacted in recent Congresses, the most recent DPA reauthorization was
enacted in the Fiscal Year 2019 National Defense Authorization Act
(P.L. 115-232). However, DPA reauthorization in the Senate is under the
jurisdiction of the Senate Committee on Banking, Housing, and Urban
Affairs, of which you are the Ranking Member.
I respectfully suggest that you encourage that Committee to
examine, as part of its reauthorization, the integration of interagency
interactions with regard to mobilization requirements, roles, and
responsibilities across the interagency community.
Dr. Michienzi. Preparing for defense mobilization requires a whole-
of-government effort. For instance, the Department of Education to help
with workforce training, the Department of Transportation to enable
movements of people and equipment, the Department of Commerce and the
U.S. Trade Representative to help balance trade and the flow of goods
into and out of the U.S. while preserving U.S. capability. Under the
current Defense Production Act (DPA) authorization, multiple agencies
have authority for Title I, which is used to prioritize government
orders so they can be delivered on time if there are commercial orders
that would delay the delivery. Title III, which is the investment part
of DPA, is a unique defense authority and it should remain so. There
are so many risks and issues within the defense industrial base, that
diluting that authority risks reducing its effectiveness--just at a
time when it is needed the most. Other agencies have investment
authorities and funding which can be used to address their needs.
21. Senator Warren. Dr. McGinn, do you believe that energy self-
sufficiency enhances the Nation's national security?
Dr. McGinn. Absolutely. Energy self-sufficiency eliminates the risk
of the dependence of foreign sources of energy that could be impacted
by trade policy, conflict, or natural disaster.
22. Senator Warren. Mr. Berteau, Dr. McGinn, and Dr. Michienzi, is
Congress currently appropriating enough money to the DPA Fund to carry
out Title III activities at the speed and scale necessary to respond to
PRC economic warfare and mobilize in the event of a conflict?
Mr. Berteau. Senator Warren, there are not sufficient
authorizations or appropriations for DPA Title III. In part, this is
because DOD budget requests are based on DPA requirements that do not
reflect the true readiness and mobilization needs of the Department.
Congress, and this Committee, have the capability and, I believe, the
affirmative responsibility to address that shortcoming, to direct the
administration and DOD to determine those needs (and the basis for that
determination) to provide that information to the Committee. I
recommend that the Committee not wait until the final enactment of the
Fiscal Year 2026 NDAA to provide such direction to DOD but instead, as
I stated in my testimony, to direct DOD to conduct a full-blown
exercise to determine what mobilization requirements are and to
describe the scenarios on which those requirements are based. I
recommend the Committee direct receipt of the results between now and
the time the Senate and the House of Representatives finalize the
Fiscal Year 2026 NDAA.
Dr. McGinn. Congress has dramatically increased appropriations to
the DPA Fund since the COVID-19 pandemic. Many of these appropriations
have focused on countering Chinese industrial policy efforts to gain
dominant market positions in areas such as rare earth minerals,
batteries, and specialty chemicals. Congress could appropriate more
funds for these and other efforts.
Congressional support for mobilization would be welcome on a number
of fronts, including appropriated funds in the DPA Fund. Title III
activities will help increase domestic industrial capacity in key
sectors that support U.S. military capability development.
Dr. Michienzi. No. Defense industrial base issues are immense.
Decades of supply chain globalization and diminishing U.S. capability
have made this country vulnerable if conflict should arise. Take the
example of China restricting the exports of certain critical minerals.
The PRC controls 80 percent of the processing of critical minerals, and
they understand completely where the U.S. uses these materials--
including our most critical weapons systems, satellites, and
communications equipment. They have restricted a handful of materials
so far, and those restrictions have been targeted to maximize pain for
U.S. industry--both commercial and defense. But there are many more
they control and could weaponize if a conflict occurs. DOD funded 8$700
million over the past 4 years in this sector--a large portion of the
Title III budget--but this is not nearly sufficient to completely
mitigate the issues. And there are many other industrial base
problems--shipbuilding, castings and forgings, microelectronics,
missiles and munitions, etc. Title III is the most efficient and
effective way to address these issues. Nowhere else in DOD is
positioned to look across all portfolios to see cross-cutting issues
and address them in a holistic manner. More funding would allow it to
be used for strategic portfolio and sector investments (similar to what
is being done with critical minerals) vs. having a more `whack-a-mole'
approach driven by insufficient funding.
defense competition
23. Senator Warren. Dr. McGinn and Dr. Michienzi, what are the
cost, schedule, or readiness benefits of prioritizing an open systems
approach?
Dr. McGinn. Prioritizing open systems approaches help DOD to foster
competition and refresh technology throughout the life of a program.
Increased competition helps lower overall costs and prevents vendor
lock-in to proprietary solutions.
Dr. Michienzi. Open systems approaches are the most cost effective
and efficient way for DOD to acquire and sustain its systems and its
ability to adopt innovation and new capabilities. Currently most DOD
systems are provided by a sole supplier (vendor lock) who owns all the
technical data, thereby reducing competition which leads to higher
pricing and lack of technology development. Having an open system,
along with the technical data, allows DOD to compete production
contracts for systems to get better pricing and potentially better
technology. It also allows DOD to upgrade systems to provide increased
performance and readiness, and to mitigate obsolescence issues--
something that constantly plagues the department.
24. Senator Warren. Dr. McGinn and Dr. Michienzi, do you have any
quantitative analysis or examples that show the cost, schedule, or
readiness benefits of prioritizing an open systems approach?
Dr. McGinn. One example where an open systems approach has shown
benefits is the Army's Joint Light Tactical Vehicle (JLTV) program.
During the 2022-2023 recompete for JLTV, AM General defeated the
incumbent Oshkosh Defense. This was very surprising given the history
of long-running franchise programs over the past several decades. The
Army's open systems approach to JLTV enabled an effective competition
during the recompete. While the Army leadership just canceled JLTV, the
competition showed the value of an open systems approach.
Dr. Michienzi. Although I don't have quantitative analysis, the
Sentinel program was one of the first Major Defense Acquisition
Programs (MDAPs) to use digital engineering and open architecture. I
know that it has saved the Air Force money, even before the system is
fielded, and allowed them to keep competitive pressure on industry. I'm
sure you can get data from the Air Force.
25. Senator Warren. Dr. McGinn and Dr. Michienzi, do you have any
quantitative analysis or examples that show the cost, schedule, or
readiness harms of failing to prioritize an open systems approach?
Dr. McGinn. The F-35 fighter aircraft program is an example of
this. Like many systems at the time, DOD did not prioritize an open
systems approach when it competed the F-35 program. This resulted in a
largely closed proprietary system that limited DOD's flexibility and
created a reliance on a single vendor for updates and support.
Dr. Michienzi. From my time working for a Navy Program Office,
there was an example where the prime contractor was charging 18 percent
markup on the rocket motors and another 18 percent to manage the rocket
motor supplier for a key missile system. Had they had an open systems
approach and the technical data, they could have looked at other
options for the rocket motors to avoid that high cost.
26. Senator Warren. Mr. Berteauand Dr. Michienzi, you previously
testified that many governmentwide acquisition contracts ``limit the
number of companies eligible to receive awards and offer few
opportunities for new companies to gain a spot.'' What tools would you
recommend DOD use to increase competition?
Mr. Berteau. Senator Warren, although agency heads and many of
their personnel focus on reports regarding the breadth and depth of
competition in Federal contracts, it is vital to recognize that
competition is not an end in itself. Competition is a tool that,
properly pursued, enables Federal agencies to achieve its needed
results and outcomes more effectively and efficiently through
contracts. Adequate competition also helps ensure that the government
pays a fair price for contract results, and competition can spur
innovation. Finally, a competitive business environment can provide
surge capacity in time of war or emergency.
The testimony you reference in your question was my statement for
the record for the April 26, 2022, hearing before the Senate Armed
Services Committee on the health of the defense industrial base.
Specifically, I wrote that ``DoD contracts are often awarded to
companies eligible under a set of contracts known as GWACs, or
governmentwide acquisition contracts. Many of these contracts limit the
number of companies eligible to receive awards and offer few
opportunities for new companies to gain a spot on any given GWAC. This
makes the job of the contracting officer easier but does little to
increase the number of bidders.''
GWACs award contracts to a limited number of companies, then
compete task orders only among those firms on the GWAC schedule. Under
both the Trump and Biden administrations, the implementation of an
approach to contracting called ``category management'' meant that some
agencies shifted contract work to a GWAC on which incumbent companies
were not eligible to bid for task orders and for which no opportunity
existed for those incumbent companies to become eligible on that GWAC
(through a process referred to as an ``on-ramp''). When interested,
capable companies are unable to bid on a contract, competition is
reduced.
Some ways to offset that reduction in competition is for the
Federal Government to:
a) Include more companies on GWAC schedules
b) Increase the frequency of on-ramp opportunities
c) Avoid shifting ongoing contract work to other GWACs on which
incumbent contractors are ineligible to bid.
The Trump administration is currently assessing consolidating under
the General Services Administration GWACs for ``common products and
services'' and for information technology contracts. Agency proposals
and comments are due to GSA by May 19, 2025. This Committee could
benefit from directing GSA to provide their plan for such
consolidation, particularly with regard to DOD.
Dr. Michienzi. Requiring programs to carry multiple contractors for
integration, but for also critical sub-systems until Milestone B. It
will cost more up front but will reduce risk and save the program money
overall because competition will drive costs down and ensure DOD is
getting the best technology, while providing alternatives should an
issue arise during development.
acquisition workforce
27. Senator Warren. Mr. Berteau, how does a well-qualified
acquisition workforce benefit the industry and the Department of
Defense?
Mr. Berteau. Senator Warren, the defense industry and all Federal
Government contractors depend on a competent, capable, and fully
staffed acquisition workforce. This workforce includes contracting
officers, program managers, and those who develop requirements and help
determine what to buy as well as how to buy it. Actions that undermine
such a workforce are detrimental to regular operations as well as
planning for mobilization.
28. Senator Warren. Mr. Berteau, do you have any examples of how a
program was less costly or faster because it was managed by an
acquisition official who was an acquisition expert?
Mr. Berteau. Senator Warren, one of the challenges of the Federal
procurement process is the focus on problems to the exclusion of
documenting success stories. In my experience, there is a strong
correlation between acquisition expertise and successful outcomes, but
there are many other factors that have equal or greater impact on
success, including program management, adequate and stable funding,
consistent requirements, and support from the chain of command and the
Congress. There are no studies of which I am aware that would prove a
cause-and-effect relationship between acquisition expertise and program
success in meeting cost, schedule, and performance goals.
29. Senator Warren. Mr. Berteau, how long does it take for someone
to become an acquisition expert?
Mr. Berteau. Senator Warren, I am unaware of any analysis that can
answer this question, but in my experience there is wide variation in
the range of time it takes to become an expert.
30. Senator Warren. Mr. Berteau, does DOD have the acquisition
workforce it needs to manage DOD contracts, and if not, what resources
or training does the workforce need?
Mr. Berteau. Senator Warren, the data reported by Federal agencies
show that DOD has a smaller percentage of vacancies in the contracting
officer workforce than many other agencies. It is likely that recent
actions such as the Deferred Resignation Program, termination of
probationary employees, retirements under VERA and VSIP, and
Reductions-in-Force actions will increase the number of vacancies in
the DOD acquisition workforce. I suggest that this Committee request
up-to-date information from DOD.
31. Senator Warren. Mr. Berteau, would the Department of Government
Efficiency's significant layoffs or resignations of DOD's acquisition
workforce hinder DOD's ability to keep programs on schedule?
Mr. Berteau. Senator Warren, layoffs, resignations, and retirements
will hinder DOD's ability to award and administer its contracts and
will impact program success.
Dr. Michienzi. DOD will needs experienced people with expertise in
multiple areas, including acquisition. The current workforce cuts do
not seem to be strategically planned to preserve that capability, while
trying to achieve efficiencies. Developing a list of workforce skills
necessary and matching it against requirements would make the effort
more effective and still allow DOD to maintain the people necessary to
keep programs on schedule, as well as make them efficient and cost-
effective.
32. Senator Warren. Mr. Berteau, would the Department of Government
Efficiency's significant layoffs or resignations of DOD's acquisition
workforce hinder DOD's ability to manage programs efficiently and cost-
effectively?
Mr. Berteau. Senator Warren, layoffs, resignations, and retirements
will hinder DOD's ability to manage programs efficiently and cost-
effectively.
Dr. Michienzi. DOD will needs experienced people with expertise in
multiple areas, including acquisition. The current workforce cuts do
not seem to be strategically planned to preserve that capability, while
trying to achieve efficiencies. Developing a list of workforce skills
necessary and matching it against requirements would make the effort
more effective and still allow DOD to maintain the people necessary to
keep programs on schedule, as well as make them efficient and cost-
effective.
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