SRM Supply Chain

DOD relies on a multi-tiered supply chain to provide the SRMs that are  used for missile propulsion. MIBP’s Role in Identifying Industrial Base Risks

MIBP, which is part of the Under Secretary of Defense for Acquisition,  Technology, and Logistics, is DOD’s primary representative for issues  affecting the defense industrial base. For example, MIBP leads the  Joint Industrial Base Working Group, which shares industrial base  information across DOD agencies and military departments. Solid Rocket Motor Suppliers

Over the last 20 years, the SRM industrial base has consolidated from six  to two U.S. manufacturers—Aerojet Rocketdyne and Orbital ATK. Figure 3 shows the industry trends among  SRM manufacturers. While the missile prime contractor found it viable to turn to a foreign  source for the AMRAAM program, Congress and DOD have been  concerned about the potential negative impacts the addition of a foreign  supplier could have on a fragile domestic SRM industrial base. Similarly, even  though DOD recognizes that access to global markets provides the  necessary competitive pressures to incentivize U.S. suppliers to remain  competitive and control costs, it has also noted that there needs to be a  commitment to investing in the U.S. SRM industrial base to develop and  produce critical technologies for the next generation of weapon systems. At this stage, it is too early to tell how, if  at all, the newest competitor, whose product line is focused on small  SRMs, will disrupt the business of the two long-standing U.S. SRM  manufacturers that produce large and small SRMs. Single Source Suppliers Drive Material Availability Risks but Mitigation Actions Underway

During our review, we found that the decreased demand for SRMs has  resulted in a loss of suppliers in the supply chain, increasing the risk that  key components and materials are only available from single sources. Should such components and materials become unavailable, production  delays could result. One SRM manufacturer estimated that the supply chain has dropped  from approximately 5,000 sub-tier suppliers to about 1,000 suppliers over  the last 20 years. In this respect, the U.S. SRM manufacturers we  spoke with said their processes have improved in recent years and  they receive more advanced notice when suppliers plan to exit the  market, allowing them to take steps such as stockpiling supplies or  making last buys while additional suppliers are identified. In September 2017, we reported that DOD program offices have limited  information from contractors that would help them to identify and  proactively manage risks stemming from a single source of supply for  missile systems, among other items. Manufacturing Engineers’ Solid Rocket Motor Design Skills Declining but Workforce Project Initiated

MIBP’s annual industrial capabilities reports to Congress have  consistently stated that the limited number of new missile development  programs inhibits DOD’s ability to provide opportunities that maintain the  workforce capabilities SRM manufacturers need to meet current and  future national security objectives. These capabilities include engineering  skills related to SRM concept designs, system development, and  production, which are critical to meeting potential requirements for new  SRM designs. The  purposes of the project are to provide opportunities for the SRM  manufacturers to develop new SRM design skills for less experienced  engineers and mature advanced technologies. Agency Comments

We are not making recommendations in this report.
Why GAO Did This Study

DOD relies on a multi-tiered supply chain to provide SRMs, the propulsion systems behind the various missile systems that provide defense capabilities to meet U.S. national security objectives. The SRM industrial base includes manufacturers that turn to an extensive network of suppliers that provide the raw materials, components, and subsystems needed to build SRMs. DOD is responsible for developing a strategy for the national industrial base that ensures that defense contractors and their suppliers are capable of providing the goods and services needed to achieve national security objectives.
GAO was asked to review the state of the U.S. industrial base for SRMs. This report addresses (1) SRM industry trends, (2) single source supplier risks, and (3) opportunities for SRM manufacturers' engineering workforce development. GAO analyzed DOD's annual industrial capabilities reports to Congress for fiscal years 2009 through 2016, which reflect DOD's most current information on SRM risks, and reviewed DOD budget data and information from missile prime contractors and SRM manufacturers. GAO also interviewed missile prime contractors, SRM manufacturer representatives, and officials from DOD and the military departments.

What GAO Found

Over the past two decades, the solid rocket motor (SRM) industrial base has undergone various changes including consolidation and recent expansion. Specifically, since 1995, the industry has consolidated from six U.S. manufacturers to two U.S. manufacturers. With regard to expansion, a foreign supplier entered the market in 2012, and in 2017, a U.S. firm, which is ultimately foreign-owned, was also established. According to the Department of Defense (DOD) while it supports competition, its current demand for SRMs can only sustain two manufacturers. Although at this stage it is too early to know how, or if, these new entrants will impact the economic viability of the more long-standing U.S. manufacturers.
The consolidation in the SRM industrial base has also been accompanied by a decrease of suppliers throughout the supply chain. For example, one SRM manufacturer estimated a decrease in suppliers, from approximately 5,000 to 1,000, over the last 20 years. This increases the risk of production delays and disruptions in the event that key components and materials available from a single source become unavailable from that source. GAO found that DOD and industry are taking steps to identify and mitigate these risks, such as by establishing alternative sources and requiring advance notice when suppliers are considering exiting the market.
In its annual industrial capabilities reports to Congress, DOD has consistently stated that the limited number of new missile development programs inhibits its ability to provide opportunities to help SRM manufacturers maintain their workforce capabilities. Specifically, with few new missile programs being initiated, engineers have had fewer opportunities to develop their engineering skills related to SRM concept designs, system development, and production, which are critical if SRM performance issues arise. However, in 2016, DOD funded a 4-year project to enhance engineering design skills for less experienced engineers working for the two U.S. manufacturers and help them develop advanced SRM technologies.

What GAO Recommends

GAO is not making recommendations at this time.