Industrial Base Considered Adequate to Satisfy Defense Planning Guidance

The key role of the ammunition industrial base is to replenish the ammunition stockpile. According to DOD, the supplier base and the technical ability to manufacture Copperhead parts have disappeared. DOD officials stated that shortages of preferred munitions will be likely if two major regional conflicts arise and that shortages will be met with substitute munitions. Two of the key studies were DOD’s 1994 and 1995 studies that attempted to evaluate the financial viability of all the firms comprising the industrial base. DOD assumed that the remaining 45 firms were financially viable, even though it did not have enough financial data to perform break-even analyses. Therefore, DOD is continuing to monitor these firms to ensure it retains its necessary production capacity. Assessment of the Adequacy of the Industrial Base Depends on Assumptions Used

If the key assumptions in the Defense Planning Guidance and DOD’s industrial base studies are correct, the industrial base will be capable of simultaneously supplying peacetime ammunition needs and replenishing the ammunition stockpile as required, following one or two major regional conflicts. However, most of the private studies have concluded that the industrial base is inadequate to meet the services’ ammunition requirements. We identified the differences in underlying assumptions that caused wide differences in the reports’ conclusions.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the Department of Defense's (DOD) ability to meet peacetime ammunition requirements, and to replenish the ammunition stockpile following two major regional conflicts.

What GAO Found

GAO found that: (1) according to DOD, the ammunition stockpile has no major shortages due to the industrial base; (2) there is no longer a requirement to surge the industrial base during conflicts; (3) the most lethal, preferred munitions will be at a premium, and some requisitions will be filled with older, substitute munitions, but DOD considers these items adequate to defeat the expected threat; (4) DOD is confident in the results of its financial viability studies of firms comprising the ammunition industrial base, even though it did not receive sufficient data to evaluate the financial condition of all firms in the industrial base; (5) changes to DOD assumptions could cause the DOD industrial base assessment to change even if production capacity remains stable; and (6) private studies that have concluded that the industrial base is inadequate to meet replenishment requirements during and following a national emergency are based on underlying assumptions that differ considerably from DOD assumptions.