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1 [1] (December 14, 2016)

handle is hein.crs/crsmthmbbzs0001 and id is 1 raw text is: $ Congressional Research Service Irfo r rgthelejasla ye debate sirco 1914 December 14, 2016 Defense Primer: U.S. Defense Industrial Base What is the U.S. Defense Industrial Base? The working legal definition for the U.S. defense industrial base is found in armed forces law. Title 10 U.S.C. §2500(1) defines the national technology and industrial base as persons and organizations that are engaged in research, development, production, integration, services, or information technology activities conducted within the United States and Canada. This includes commercial firms across different sectors of the U.S. economy. Commercial firms that contract with DOD include manufacturing, service, and advanced technology firms from every U.S. state. In a highly open economy, the defense industry can incorporate both domestically owned firms and foreign owned firms that engage in direct investment, hire U.S. workers, and abide by U.S. laws. What is the Structure of the Defense Industry? The structure of the U.S. defense industrial base can be imagined as a collection of firms placed in a matrix of three dimensions: function, platform, and ownership. In the first dimension of function, private enterprises are categorized as prime contractors, subcontractors, and parts suppliers. Figure I. Structure of Defense Firms Source: CRS Report RL30720, The U.S. Defense Industrial Base: Trends and Current Issues, by Daniel H. Else (2000). Function of Defense Contractors Prime contractors (also known as primes) deal directly with the DOD and hold responsibility for creating final products. Primes have traditionally produced platforms such as aerospace systems and ships. Subcontractors provide some portion of the final product to the prime. These components can range from engines for an aircraft to an electronics suite for a ship to a computer algorithm. Suppliers provide more generic parts such as castings, forgings, and semi- conductors to the subcontractors and prime contractors. Because these parts often have both military and civilian uses, these suppliers are referred to as the dual-use sector (see 10 U.S.C. §2500(2)). Products in the dual use sector are listed on the Commerce Control List (CCL) and are regulated by Export Administration Regulations (EAR). The Bureau of Industry and Security (BIS) administers these regulations under the authority established by the Export Administration Act of 1979 (P.L. 96-72). Products with military uses are listed on the U.S. munitions list (USML). The Department of State regulates their transfer through the International Traffic in Arms Regulations (ITAR) under the authority of the Arms Export Control Act (AECA) of 1976 (P.L. 94-329). Manufacturing Platforms Platforms are the weapons systems that DOD purchases. These can include aircraft, ships, and armaments. Each type of weapon system constitutes a sector of the defense industry which exhibits unique and specific production characteristics. For example, an aircraft carrier is built over a number of years as a unique unit while uniforms and rifles are mass produced. Defense contractors can operate in more than one sector. General Dynamics, for instance, builds both aircraft and tanks, simultaneously operating in both aircraft and land vehicle defense sectors. Ownership and Labor Force Ownership shows production facilities that are either in the private sector or in the public domain. Public ownership exists at one end of this spectrum in the form of federally owned and operated arsenals and shipyards. At the other end of the spectrum, there is private ownership where production facilities are privately owned and operated. A significant portion of the facilities and production equipment used to manufacture defense material can be government-owned but staffed by private contractors. These are referred to as public-private partnerships (PPPs). Consolidation of Primary Contractors The defense industry is adapting to shrinking appropriations following the end of U.S. combat operations in Iraq and Afghanistan. It also faces strictures imposed by the Budget Control Act (BCA) of 2011 (P.L. 112-25). The enactment of the BCA has forced a more rapid reduction in defense spending than would have otherwise been the case. This has imposed additional stress on the defense industry. Cyclical changes in defense spending are not new. Historically, defense spending tends to rise during an active military operation and tends to fall as combat operations wind down. However, the defense industry underwent a significant change during the last defense drawdown after the end of the Cold War. In 1993, the DOD announced a www.crs.gov 1 7-5700 - HORfZONTAIL INTEGRATION ~ Sub$(Pntracto ; at Sple

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