A National Defense Industrial Association report says the health of the defense industrial base received a passing “C“ rating “but with a worrying downward trend“ driven by threats to intellectual property, cyber vulnerabilities and declining production inputs.
Industry competition for defense contracts and the Pentagon's demand for defense goods and services were cited as areas of confidence in the “Vital Signs 2020“ report, NDIA said in the executive summary.
The state of competition in the defense industrial base scored 96 out of 100 for 2019 due to high level of capital expenditures, low level of market concentration of total contract award dollars and availability of cash assets.
Demand for defense services and products earned a score of 94 driven by the Department of Defense's increasing volume of contract obligations. DoD recorded $368.7B in total contract obligations in 2018, up from $306B in 2016.
One of the areas of concern mentioned in the report is industrial security, which earned a score of 63 due to threats to data security and IP.
The report gave defense industry production inputs a score of 68 due to low industry workforce size and issues with the security clearance process.
NDIA also assessed other areas, including investment and productivity in the U.S. national innovation system, industrial surge capacity, supply chain performance and political and regulatory activity.
“The overall defense industrial base's health score of 77 out of 100 suggests a satisfactory ability to meet current mission requirements. However, the fast-moving era of great power competition requires more, including the delivery of extraordinary capabilities to reverse the erosion of the capability advantages we hold over our competitors,“ according to the report.