June 16 OSD Conference Call

OSD overview: MIBP – Remains a priority for OSD to continue engaging with industry; have added “partnership” to pillars of OSD industrial collaboration; focusing on semi-conductor industries and women and minority owned businesses who the SecDef will be meeting with shortly; OSD has lost 40% of the supply base over the past decade and this is of concern and looking for ways to address these loses; published supply chain report in response to President’s EO and we are encouraged to read it. The rest of the year will now focus on the rest of the supply chain beyond the EO scope. The scope of supply chain cooperation also includes Allies and other global partners as its unreasonable to expect that our supply chain concerns can all be addressed by the US alone. OSD staff are beginning to tour key defense industrial base facilities around the country to better understand the supply chain challenges firsthand. OSD proposed to scale back these meetings to a monthly meeting and this proposal was supported by all participants.

DCMA: COVID impacts continue to decline; 7 facilities currently impacted; average time to reopen is 18.6 days; same stats from last week so the impact is constant week over week at the moment.

DPC: P&R memo for vaccines overseas for contractors and dependents directly supporting the DoD has been signed and a copy will be coming our way for distribution to our members. Made in America discussion with OMB ongoing with the goal of developing a proof of concept for mandated reviews prior to contract award. Question raised regarding COVID related delays in contract awards as some industries have raised concerns this week—OSD response: “No we are not seeing such an impact but we will look into the matter more closely.”

Small Business: Army reporting just below goal at 27.82% which is ~$18B awarded to date with $25B left to spend for small business contract awards this year. Army small business is working on their agenda for the annual AUSA conference scheduled for 12-13 October 2021. Air Force: to date have awarded ~$8.5B to small businesses which is about 18% of all US Air Force contract awards this year to date.

EO 14017 Supply Chain: The Administration released the 100 day report last week focused on four key areas. While DoD was the lead on materials it was an interagency product and DoD participated in the other supply chain categories. The challenges are a whole of government and economy challenge and the NSC is leading the effort to begin implementing the published recommendations. Kick off meeting was today at the NSC. The NSC is also looking at how the USG can strategically change how it looks at the supply chain. OSD staff are participating in a number of industry engagement events with a focus on how best to implement various recommendations. Also, DoD is working with the State Department to develop the best approach with Allies and partner nations that are trusted to address sources of supply today with less than friendly nations. OSD did ask that for the FY23 NDAA, if industry/associations are proposing any legislation geared to supply chain matters to please share early with OSD.

NOTE: OSD launched Project SPECTRUM for small businesses specific to best cyber hygiene practices from a DoD/OSD perspective.

Additional Insights from DAEC:

Conventional Arms Transfer (CAT) Policy Rewrite: NSC update last week noted that they are about 80% done with this effort. DAEC input which was early in the process was taken into consideration. Although as expected human rights considerations will be amplified, the NSC believes their draft policy protects the ability to argue economic impact to an industry and certainly protects the Administration’s ability to pursue a major defense sale that furthers a particular bi-lateral and regional policy regardless of any perceived CAT policy limits. State Department will soon announce an industry pulsing session on the draft CAT policy to inform and solicit additional industry input. Keep an eye out for their announced meeting date and time.

NSC MDE sales task force: NSC staff confirmed that the task force, originally formed to review all Saudi pending sales and deliveries of MDE while bleeding over into other regional and “fringe” nation transfers, has been disbanded. This is good news as the more normal transfer decision process is taking effect with one major exception. NSC regional directors have the lead for MDE sales decisions, with interagency support, where such a proposed sale may be contentious and debated. Given the diminished role of the Defense Department in foreign policy matters, it is critical to develop a relationship with the NSC regional directors.

G7/NATO update: DAEC has a call with the US Mission to NATO on the 23rd. This is our exclusive opportunity to better understand what has been accomplished and agreed to with the President’s and SecDef’s meetings this month. Members interested in learning more, please reach out to us to set up a meeting time to discuss.

About the authors

Keith Webster

Keith Webster, president of the U.S. Chamber of Commerce’s Defense and Aerospace Council, guides the focus of the council to strengthen the U.S. defense and aerospace industries by influencing domestic and international policy on behalf of its members.

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