The military services,  Industrial Policy, and other DOD components collect information about  the health and viability of certain defense supplier-base sectors. To better target its monitoring resources, Industrial Policy  recently established criteria for supplier-base characteristics that could be  indicators of supply concerns. These criteria have primarily been applied  to the missile and space defense sectors and have not been used to guide  the identification and monitoring of supplier-base concerns for all sectors  departmentwide. In addition, DOD has also developed lists of items deemed critical at a  point in time as part of its supplier-base monitoring efforts. DOD Uses an Informal Approach to Identify Supplier-Base Concerns, with No Departmentwide Reporting Requirement on When to Elevate These Concerns

DOD often relies on the military services, program offices, or prime  contractors to identify supplier-base concerns, including gaps and  potential gaps, with no departmentwide requirement for when to report  these gaps to higher-level offices. Further, program officials  reported that they generally use their discretion in determining when to  report identified gaps and planned actions to higher DOD levels. As a  result, DOD’s ability to know when a departmentwide approach is needed  to mitigate these concerns may be limited. DOD Often Relied on Program Offices and Prime Contractors to Identify Supplier-Base Concerns in the Last 5 Years

DOD often relies on its individual program offices to ensure that their  respective supplier bases are sufficient. Specifically, 16 of the 20 program officials we  surveyed reported facing supplier gaps or potential gaps, including  obsolescence of component parts or technologies, diminishing  manufacturing sources for components, and production challenges. A  framework for programs to report supplier-gap information could assist  Industrial Policy’s decisions on when to activate available tools to mitigate  supplier-base concerns, such as the authorities under the Defense  Production Act. Conclusions

While DOD has a number of efforts to monitor its supplier base, these  efforts lack a framework and set of characteristics to identify and track  supplier-base concerns and allow for consistent reporting to higher levels  within DOD, such as Industrial Policy. 2. Appendix I: Scope and Methodology

To assess Department of Defense (DOD) efforts to monitor its defense  supplier base and identify and address gaps that might exist in its supplier  base, we reviewed relevant laws and regulations, such as sections of Title  10, U.S. Code, the DOD 5000 series, National Security Space Acquisition  Policy 03-01, and the Defense Production Act of 1950, as amended. We met with officials from DOD’s Office of the Deputy Under  Secretary of Defense for Industrial Policy (Industrial Policy) to review its  processes and actions for monitoring the defense supplier base. Defense Acquisitions: Assessments of Selected Weapon Programs.
Why GAO Did This Study

The Department of Defense (DOD) relies on thousands of suppliers to provide weapons, equipment, and raw materials to meet U.S. national security objectives. Yet, increased globalization in the defense industry and consolidation of the defense supplier base into a few prime contractors has reduced competition and single-source suppliers have become more common for components and subsystems. For this report, GAO (1) assessed DOD's efforts to monitor the health of its defense supplier base, and (2) determined how DOD identifies and addresses gaps that might exist in its supplier base. To conduct its work, GAO reviewed supplier-base-related laws, regulations, and guidelines; met with officials from DOD's Office of Industrial Policy, defense contractors, and other DOD officials; and surveyed 20 major DOD weapon acquisition program officials on potential supplier-base gaps.

What GAO Found

DOD's efforts to monitor its supplier base lack a departmentwide framework and consistent approach. Its monitoring efforts generally respond to individual program supplier-base concerns or are broader assessments of selected sectors. As part of its supplier-base monitoring efforts, DOD has also previously identified lists of critical items--which according to DOD's Office of Industrial Policy (Industrial Policy) do not reflect the dynamic changes that occur in industry, technology, and DOD requirements. While DOD recently established criteria for identifying supplier-base characteristics that could be problem indicators--such as sole-source suppliers and obsolete or emerging technologies--these criteria have primarily been applied to the missile and space sectors and have not been used to guide the identification and monitoring of supplier-base concerns for all sectors departmentwide. DOD uses an informal approach to identify supplier-base concerns, often relying on the military services, program offices, or prime contractors to identify and report these concerns, including gaps or potential gaps. As no requirement for when to report such gaps to higher-level offices exist, knowledge of defense supplier-base gaps across DOD may be limited. While 16 of the 20 program officials GAO surveyed reported that they identified supplier gaps or potential gaps over the past 5 years, only 4 reported sharing this information with Industrial Policy. These gaps included obsolescence of components and items with only one available supplier. Program offices often relied on the prime contractor to identify and help address supplier-base gaps, and prime contractors and programs generally used their discretion as to when to report gaps to higher levels. As a result, Industrial Policy may not be receiving information to help it activate available tools, such as the authorities under the Defense Production Act, to mitigate supplier-base gaps.