DOD Has Identified Certain Materials as Critical but Approach Not Comprehensive

From 2011 to 2015, DOD identified certain materials, including rare  earths, as critical to meet its individual statutory responsibilities, but has  not taken a comprehensive approach to identify which of these materials  are critical to national security. See table 4 for the rare earths that each DOD organization  separately identified as critical in defense applications, critical to national  security, or as strategic and critical in different reports. DOD’s identification of which rare earths, if any, are critical to national  security is fragmented. According to DOD officials, rare earths  from the National Defense Stockpile have not been used. Developing a  comprehensive approach for ensuring a sufficient supply of rare earths for  national security needs—one that can establish criticality, assess supply  risks, and identify mitigating actions—would better position DOD to help  ensure continued functionality in weapon system components should a  disruption occur, even though supply disruptions in rare earths have not  occurred over the last several years. There is not yet agreement on what constitutes “critical” rare earths. While various organizations’ definitions of critical may be similar, DOD  has identified 15 of the 17 rare earths as critical over the last 5 years. This makes establishing priorities to analyze supply risk difficult. DLA- Strategic Materials does a methodical job of analyzing risks for all  materials, but its focus is a four-year timeframe with stockpiling as its  mitigation tool. MIBP relies on other DOD organizations to identify and  elevate risks, relies primarily on the market to resolve supply disruptions,  and has not put in place measures to evaluate the success of its  mitigating actions. Recommendations for Executive Action

To fully identify and mitigate risks associated with the availability of rare  earths, we recommend that the Secretary of Defense take the following  three actions:
Direct the SMPB to designate which, if any, rare earths are critical to  national security in order to provide a common DOD understanding of  those materials and focus resources. DOD  concurred with all our recommendations. Such an approach would better position DOD to help ensure  continued functionality in weapon system components should a disruption  occur. Appendix I: Objectives, Scope, and Methodology

The Joint Explanatory Statement accompanying the Carl Levin and  Howard P. “Buck” McKeon National Defense Authorization Act (NDAA)  for Fiscal Year 2015 included a provision for GAO to review the  Department of Defense’s (DOD) efforts to identify and mitigate risks in its  rare earth materials (rare earths) supply chain, including the Defense  Logistics Agency-Strategic Materials’ (DLA-Strategic Materials)  stockpiling efforts. We assessed the extent that DOD (1) determined  which rare earths, if any, are critical to national security; and (2) has  identified and mitigated risks associated with rare earths, including the  effects of a potential supply disruption.
Why GAO Did This Study

DOD depends on rare earths that contain one or more of 17 similar metals which have unique properties, such as magnetism at high temperatures, to provide functionality in weapon system components. Many steps in the rare earths supply chain, such as mining, are conducted in China, a situation that may pose risks to the continued availability of these materials. The Joint Explanatory Statement accompanying the Carl Levin and Howard P. “Buck” McKeon National Defense Authorization Act for 2015 included a provision for GAO to review DOD efforts to identify and mitigate risks in its rare earths supply chain.
This report assesses the extent that DOD (1) determined which rare earths, if any, are critical to national security; and (2) has identified and mitigated risks associated with rare earths, including the effects of a potential supply disruption. GAO reviewed DOD reports from 2011-2015 and relevant legislation; and collected information from DOD, the military departments, and industry organizations.

What GAO Found

Three Department of Defense (DOD) offices have identified certain rare earth materials (rare earths) as critical for some defense applications, such as lasers, but DOD has not taken a comprehensive, department-wide approach to identifying which rare earths, if any, are critical to national security. Specifically, DOD offices have not yet agreed on what constitutes “critical” rare earths. Using different statutorily-based definitions, these offices have identified 15 of the 17 rare earths as critical over the last 5 years (see table).
DOD's current approach to identifying and mitigating risks associated with rare earths is fragmented. With different interpretations of which rare earths are critical, establishing priorities to analyze supply risk becomes difficult. For example, the Defense Logistics Agency-Strategic Materials office methodically analyzes risks for all materials, but its focus is a four-year timeframe with stockpiling as its mitigation tool. The Manufacturing and Industrial Base Policy office relies on other DOD organizations to identify and elevate risks, relies primarily on the market to resolve supply disruptions, and has not put in place measures to evaluate the success of its mitigating actions. According to DOD, supply disruptions in rare earths have not occurred over the last several years. Regardless, the Strategic Materials Protection Board has not developed a comprehensive approach for ensuring a sufficient supply of rare earths for national security needs—one that can establish criticality, assess supply risks, and identify mitigating actions. Such an approach would better position DOD to help ensure continued functionality in weapon system components should a disruption occur.

What GAO Recommends

GAO recommends that DOD designate which rare earths are critical to national security, and develop a comprehensive approach to help ensure a secure supply by identifying risk metrics, among other activities. DOD concurred with all the recommendations in this report and provided timeframes for action.