In 1920, Congress again stepped into the operation of the nation's weapons factories by requiring the Secretary of War to have all of the supplies needed by the Army to be produced in government-owned factories or arsenals, so long as it could be done on an "economical basis." Others have expressed concern that the act could place the arsenals at a disadvantage should DOD to look to base closures as a means to reduce defense spending. Several attempts to privatize arms production were made prior to the Civil War, culminating in a provision written into the Army Appropriations Act for 1854, addressed below, that gave the Secretary of War the explicit statutory authority to abolish any arsenal that he deemed unnecessary or useless. Factories and arsenals: manufacture at; abolition of
(a) The Secretary of the Army shall have supplies needed for the Department of the Army made in factories or arsenals owned by the United States, so far as those factories or arsenals can make those supplies on an economical basis. Nevertheless, during floor debate in the House on February 1, 1853, Representative Willis Arnold Gorman, chair of the Committee on Military Affairs, proposed an amendment to the Army Appropriation Bill on behalf of the committee stating that "That the Secretary of War be, and he is hereby, authorized to abolish such of the arsenals of the United States as, in his judgment, may be useless or unnecessary." The Defense Act of 1920

In 1920, the emphasis was somewhat different. Hence, the reorganization of the Army embodied in the Defense Act of 1920 included the creation of a permanent Assistant Secretary of War and his appointment as the individual charged with responsibility for procurement of all military supplies and for the regulation of the federal arsenals. The policy for implementing this provision of the Arsenal Act is outlined in detail in the current Army Regulation (AR) 700-94, Army Industrial Base Process , dated December 14, 2004. §4532(a), noting that the statute does not define the term "supplies," but suggesting that the term's definition in 10 U.S.C. Commanding General, Army Materiel Command (AMC) is responsible for a. managing government-owned, government-operated (GOGO) production installations (para. b. performing the "make or buy" analysis under the authority of 10 U.S.C. Conclusion

Federal manufacturing arsenals have supported the Army and the nation virtually since their births. Among other functions, the arsenals have designed and manufactured military arms and supplies, nurtured the country's early industrialization, and provided competition to private enterprise. The sophistication evident in arsenal facilities has evolved along with the nation's industrial base, sometimes leading, often trailing commercial industry in technological development, particularly during the years prior to World War I. The statute gives the Secretary of the Army the authority to "abolish" any arsenal that he considers unnecessary. It also requires the Secretary of the Army to have the supplies needed by the Department of the Army made at factories and arsenals owned by the United States, so long as this production can be carried out "on an economical basis." Yet, this section fails to define "supplies," or to explain what is meant by an "economical basis." The Department of the Army interprets the Arsenal Act in AR 700-94, Army Industrial Base Process , and lays out policy for its implementation. The ASA(ALT) retains the authority to decide whether a given article shall be manufactured in a federal facility or by a commercial supplier. To make that decision, he relies on AMC and the individual PEOs/PMs to assess the relative merits of the two choices and perform the analyses necessary to provide a basis for the decision.
The Arsenal Act (10 U.S.C. §4532) requires the Secretary of the Army to have all supplies needed by the Army to be made in government-owned factories or arsenals if this can be accomplished "on an economical basis." It also grants the Secretary the authority to "abolish any United States arsenal that he considers unnecessary." This broad mandate, and even broader authority, has lead some observers to question whether the Department of the Army is abiding by either the spirit or the letter of the law in awarding development and procurement contracts. Others have expressed concern that the seeming unilateral authority to abolish arsenals could place them at a disadvantage should the Department of Defense (DOD) seek to close military installations.
Federal arsenals, those government-owned industrial sites that have produced the engines of war for the United States Army virtually since the birth of the nation, exist and operate under the jurisdiction of the Secretary of the Army. They, along with their naval counterparts in the form of federally owned shipyards, have sustained the military services for more than two centuries.
The two sections of the act were written approximately seven decades apart and are grounded in the events of their time. The authority to abolish dates to the era just prior to the Civil War, when the arsenals functioned not only as the nation's principal source of military arms, but also helped to nurture and sustain the country's early commercial industrialization. It was a period when the arsenals were beginning to experience competition in satisfying the Army's needs.
The requirement to have Army supplies made in U.S.-owned factories or arsenals dates to the years immediately following the conclusion of World War I, when Congress, realizing that the United States faced increasing global responsibilities at a time of much-reduced defense appropriations, moved to ensure the continued existence of this "in-house" industrial base. Nevertheless, the statute does not define "supplies," nor does it spell out what is meant by making supplies "on an economical basis."
The Department of the Army has promulgated policy for the implementation of the authority to produce supplies, embodying it in Army Regulation (AR) 700-94, Army Industrial Base Policy, of December 2004. AR 700-94 assigns the responsibility for deciding whether a given article is to be manufactured at a government-owned facility or contracted to a commercial vendor to the Assistant Secretary of the Army for Acquisition, Technology, and Logistics (ASA(ATL)). It also requires the Commanding General of Army Materiel Command (AMC) and the individual Program Executive Officers (PEOs) and Program Managers (PMs) to provide the Assistant Secretary with the analyses needed to make that decision.
This report describes the roles of the federal manufacturing arsenals during the years surrounding the enactment of the two sections of the Arsenal Act, one as part of the Army Appropriations Act for 1854, and the other within the Defense Act of 1920, also known as the Army Reorganization Act of 1920, and provides historical context. The report also shows the change in language between the sections' original enactment and today, and it provides details on the Army's policy in implementing the manufacturing sourcing portion of the statute.