S.Hrg.119-77

1[Senate Hearing 119-77]2[From the U.S. Government Publishing Office]34                                                         S. Hrg. 119-7756                DEFENSE MOBILIZATION IN THE 21ST CENTURY78=======================================================================910                                HEARING1112                               BEFORE THE1314                      COMMITTEE ON ARMED SERVICES15                          UNITED STATES SENATE1617                    ONE HUNDRED NINETEENTH CONGRESS1819                             FIRST SESSION2021                               __________2223                             MARCH 6, 20252425                               __________2627         Printed for the use of the Committee on Armed Services2829[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]3031                 Available via http: //www.govinfo.gov3233                                __________3435                   U.S. GOVERNMENT PUBLISHING OFFICE3660-351 PDF                  WASHINGTON : 20253738-----------------------------------------------------------------------------------3940                      COMMITTEE ON ARMED SERVICES4142  			ROGER F. WICKER, Mississippi, Chairman4344DEB FISCHER, Nebraska			JACK REED, Rhode Island45TOM COTTON, Arkansas			JEANNE SHAHEEN, New Hampshire46MIKE ROUNDS, South Dakota		KIRSTEN E. GILLIBRAND, New York47JONI ERNST, Iowa			RICHARD BLUMENTHAL, Connecticut48DAN SULLIVAN, Alaska			MAZIE K. HIRONO, Hawaii49KEVIN CRAMER, North Dakota		TIM KAINE, Virginia50RICK SCOTT, Florida			ANGUS S. KING, Jr., Maine51TOMMY TUBERVILLE, Alabama		ELIZABETH WARREN, Massachusetts52MARKWAYNE MULLIN, Oklahoma	        GARY C. PETERS, Michigan53TED BUDD, North Carolina		TAMMY DUCKWORTH, Illinois54ERIC SCHMITT, Missouri			JACKY ROSEN, Nevada55JIM BANKS, INDIANA			MARK KELLY, Arizona56TIM SHEEHY, MONTANA                  	ELISSA SLOTKIN, MICHIGAN5758		   John P. Keast, Staff Director59		Elizabeth L. King, Minority Staff Director6061                                  (ii)6263                             C O N T E N T S6465_________________________________________________________________6667                             March 6, 20256869                                                                   Page7071Defense Mobilization in the 21st Century.........................     17273                           Member Statements7475Statement of Senator Deb Fischer.................................     17677Prepared Statement of Senator Roger F. Wicker....................     17879Statement of Senator Jack Reed...................................     28081                           Witness Statements8283McGinn, John G., Ph.D., Executive Director, Greg and Camille          484  Baroni Center for Government Contracting, George Mason85  University's Costello College of Business.8687Michienzi, Christine, Ph.D., Founder and Chief Executive Officer,    1588  MMR Defense Solutions, and Former Senior Technology Advisor to89  the Under Secretary of Defense for Acquisition and Sustainment.9091Berteau, The Honorable David J., President and Chief Executive       2592  Officer, Professional Services Council.9394Questions for the Record.........................................    399596                                 (iii)9798                DEFENSE MOBILIZATION IN THE 21ST CENTURY99100                              ----------101102                        THURSDAY, MARCH 6, 2025103104                              United States Senate,105                               Committee on Armed Services,106                                                    Washington, DC.107    The Committee met, pursuant to notice, at 9:30 a.m., in108room SD-G50, Dirksen Senate Office Building, Senator Deb109Fischer presiding.110    Committee Members present: Senators Fischer, Rounds, Ernst,111Sullivan, Schmitt, Sheehy, Reed, Shaheen, Blumenthal, Hirono,112Kaine, and King.113114            OPENING STATEMENT OF SENATOR DEB FISCHER115116    Senator Fischer. Good morning. I would like to call the117hearing today to order. The hearing is on defense mobilization.118I am pleased to welcome three witnesses to testify today.119    Jerry McGinn is a widely published former DOD [Department120of Defense] official who worked at the heart of the Pentagon's121industrial base efforts.122    Chris Michienzi brings a similar resume. She spent much of123her career inside the Industrial Base Policy Office at DOD.124    Dave Berteau comes to us from the Professional Services125Council. Before that, he served as the Assistant Secretary of126Defense for Logistics and Materiel Readiness, early put127industrial base revitalization--there seems to be an error128here. Before that he served as Assistant Secretary of Defense129for Logistics and Materiel.130    Welcome to the witnesses. Senator Wicker, the Chairman of131the Committee, is detained for a little bit, and when he comes132he will enter his testimony into the record.133    [The prepared statement of Senator Roger F. Wicker134follows:]135136             Prepared Statement by Senator Roger F. Wicker137    Today, we face an uncomfortable truth: The United States is138unprepared for a protracted conflict. This is not conjecture. The fact139is borne out by history, current assessments, and the demands of modern140warfare. The Department of Defense and the defense industrial base are141not ready to mobilize to meet a large-scale extended conflict.142    If large-scale conflict were to erupt, critical systems would be143depleted in a matter of days. We would probably lose anti-ship cruise144missiles, air defense missiles, and even unguided bombs more quickly145than we could replenish them. Our industrial base does not have the146capacity to surge production because we have not made the plans or147investments that would give it that ability. After decades of off-148shoring, our critical minerals and rare earth supply chains are149brittle. Often, our adversaries control these supply chains. We put up150roadblocks that make it hard for commercial companies to enter our151defense industrial base. The Pentagon rarely coordinates with other152government agencies like the Department of Commerce and FEMA. Both153would be necessary for mobilization. The DOD has very little analytical154capability to develop strategies that would address protracted155conflict, strategies that it could then give to senior defense leaders156and Congress.157    This Committee is going to address these problems. We will get to158work this year, in the National Defense Authorization Act (NDAA) for159fiscal year 2026. To begin that process, I am pleased to welcome three160witnesses to testify today. Jerry McGinn is a widely published former161DOD official who worked at the heart of the Pentagon's industrial base162efforts. Chris Michienzi [MACKENZIE] brings a similar resume. She spent163much of her career inside the Industrial Base Policy office at DOD, and164Dave Berteau comes to us from the Professional Services Council. Before165that, he served as the Assistant Secretary of Defense for Logistics and166Materiel Readiness. I appreciate all of you for being here to share167your expertise on this crucial problem.168    Industrial mobilization does not happen overnight. It requires169years of pre-war preparation during peacetime. World War II showed us170the power of mobilizing 20,000 companies before conflict began. Today,171we lack that foresight and scale. Clearly put, industrial base172revitalization is not optional. It is existential.173    We must take action by rebuilding domestic manufacturing. The174United States should be able to produce what we need without being175reliant on foreign suppliers for resources from steel to176semiconductors. Our manufacturers will not be able to surge capacity in177a crisis of tomorrow unless we make investments today in idle plants,178worker retraining, and material prepositioning. These actions would179echo the successful, pre-World War II planning efforts, but they would180be tailored to today's threats. We will need to expand and streamline181the Defense Production Act and undertake a wholesale modernization of182the Pentagon's industrial base policy office.183    We must explore the use of purchase commitments and lean on the184Office of Strategic Capital to provide loans and loan guarantees for185crucial production lines. New sources of supply will need to be186qualified, with an emphasis on advanced manufacturing technologies that187can quickly shift between civilian and military production. We must188incorporate our allies and partners by making it possible to co-produce189weapons with them.190    This challenge is bigger than the Pentagon alone. Numerous agencies191will have to cooperate. The Department of Commerce must help secure192supply chains. The Treasury Department will need to freeze the assets193of adversarial companies. Energy will drive power production, and Labor194will train workers. Every corner of American society--private industry,195universities, even local communities--must contribute, just as they did196when Ford built bombers and Kaiser churned out Liberty ships.197    The cost of inaction would be catastrophic. It would far exceed the198cost of action right now. A lengthy war would expose our fragility. One199conflict could erode deterrence and embolden adversaries. We cannot200repeat the complacency of the interwar years, when unpreparedness201invited aggression. Congress must act now to fund stockpile expansion,202incentivize domestic production, and mandate interagency plans for203rapid mobilization. This is not about one weapon or one war. We need to204restore America's ability to deter aggression and to defend itself and205its allies if necessary. I look forward to hearing from our esteemed206witnesses on how we bridge this gap. The clock is ticking, and history207will judge us by our resolve. I now recognize my friend and Ranking208Member, Senator Reed.209210    With that I would like to recognize the Ranking Member,211Senator Reed.212213                 STATEMENT OF SENATOR JACK REED214215    Senator Reed. Thank you very much, Senator Fischer, and I216want to welcome our witnesses. Dr. Christine Michienzi, Dr.217Jerry McGinn, and Mr. David Berteau, thank you very much for218joining us.219    This is a very important conversation, and we are fortunate220to have such a distinguished panel before us.221    Throughout history, we have consistently seen nations with222well-prepared militaries lose to nations with superior223industries. The ability to deploy well-trained troops and224advanced weapons to the front line is important in any armed225conflict, but the ability to sustain those forces with adequate226amounts of supplies and munitions is just as important.227    The Defense Acquisition University defines industrial228mobilization as, quote, ``the process of marshaling the229industrial sector to provide goods and services, including230construction, required to support military operations and the231needs of the civil sector during domestic or national232emergencies.'' Put more simply, industrial mobilization233represents the Defense Department's ability to call on the234private sector in times of crisis.235    I am concerned that the United States is not currently236prepared to do this effectively in a sustained, large-scale or237protracted conflict. The war in Ukraine and the incredible238amount of military support we have provided has been vital for239Ukraine's survival, but it has exposed our own industrial base240vulnerabilities. We have learned that our capacity to provide241vast amounts of artillery shells, precision munitions, and242other modern weapons in a rapid, responsive way, is much more243limited than we realized. Our capacity has expanded244significantly over the past 3 years, but we have relied on245existing tools such as the Defense Production Act to overcome246supply chain problems and increase production. Any future247conflict we may face, particularly in the Indo-Pacific, will248require much greater levels of military-industrial capacity, as249well as interagency coordination to leverage a whole-of-250government response.251    The process for large-scale mobilization dates back the252World War II era. When America entered the war, there was an253enormous increase in military production of ships, planes,254artillery, vehicles, and more, which eventually earned us the255title as the ``Arsenal of Democracy.'' However, we must not256forget that the industrial ramp-up actually began long before257the war started, and did not yield significant results until we258were years into the fight. This is an important lesson we259should remember today. Industrial mobilization does not occur260overnight.261    Further, while we have a useful model from our experience262in World War II, it is not a blueprint for the future. We must263recognize that the industrial base of today is very different264from any period in the past, especially considering our265reliance on information technology and software-based systems.266We will need to mobilize different sectors of the economy and267workforce unlike any time before. Moreover, we cannot assume,268as we did in World War II, that our production facilities will269be safe from kinetic or cyberattack or that we will have270uncontested supply lines for materials. I would ask our271witnesses to discuss the lessons they have drawn from the war272in Ukraine and what processes they believe need to start now so273that the United States is prepared to win the next contest.274    This Committee has spent years examining the challenges275around this issue. We have worked to identify supply chain276problems and to improve investments in long-lead items for the277military. In recent National Defense Authorization Acts,278Congress has directed the Department of Defense to stress-test279its industrial mobilization and supply chain capabilities. The280Department has found a number of challenges, including281integration of software and information technology, but it is282clear that material and labor shortages are the biggest283problems to increasing production.284    Indeed, there is nothing more important for our defense285mobilization strategy than our workforce, the men and women in286the defense acquisition corps and the personnel in the defense287industrial base. We cannot solve our industrial mobilization288and acquisition problems without an adequate supply of skilled289and trained workers.290    I would note that acquisition reform is necessary, but it291is not sufficient to address the broader issues of industrial292mobilization. In a crisis, having an acquisition system that is293efficient and effective is important, but production capacity294is far more so. Many of the policies and processes we put in295place in peacetime for the sake of efficiency may actually be296counterproductive in a prolonged crisis. That is why I am so297troubled by the mass firings of the defense civilian workforce298which the Administration is undertaking right now.299    The urgency around these issues has never been clearer. As300Russia continues its onslaught against Ukraine, and China301calculates its own potential expansion, we have to make sure302our defense industrial base is able to adapt, scale, and303outpace our competitors in the 21st century. I would ask our304witnesses' thoughts on how we might overcome this challenge,305and how we can ensure that the workforce in place is there to306do so.307    Thank you again to our witnesses, and thank you, Senator308Fischer.309    Senator Fischer. Thank you, Senator Reed. Again, welcome to310the panel.311    Dr. McGinn, you are recognized for your opening statement.312313 STATEMENT OF JOHN G. McGINN, Ph.D., EXECUTIVE DIRECTOR, GREG314 AND CAMILLE BARONI CENTER FOR GOVERNMENT CONTRACTING, GEORGE315        MASON UNIVERSITY'S COSTELLO COLLEGE OF BUSINESS316317    Dr. McGinn. Thank you, Chairwoman Fischer and Ranking318Member Reed and members of the Committee. Good morning. It is a319privilege to be here and thank you very much for having this320hearing on this important topic, which is a critical issue321facing the Nation.322    The United States has the most lethal and capable fighting323force in the world. Full stop. But as we have seen in recent324war games, as well as in challenges that Senator Reed alluded325to in production capacity for munitions, we have real326industrial base capacity challenges.327    These challenges led me to do a study that addressed the328following question, ``How well is the U.S. defense industrial329base prepared to mobilize in the event of a major conflict?''330    The short answer, published in our report, ``Before the331Balloon Goes Up,'' is that our ability to win a major war with332a near-peer competitor is very much at risk. Unless senior333officials across Washington and industry pursue bold actions334immediately, we face potentially catastrophic consequences335should the balloon go up in East Asia or elsewhere.336    Drawing on historical and recent case, we developed a337series of recommendations to enable industrial mobilization. I338would like to focus on two areas specifically. One is the339authorities and planning capabilities, and then second, our340ability to scale.341    In the area of authorities and planning, as you all know342very well, the government's ability to mobilize industrial base343starts with our legal authorities and the policies and plans.344The famous War Production Board of the Arsenal of Democracy in345World War II helped organize government and industry to address346those challenges. Similarly, during the Iraq and Afghanistan347wars, the development of the MRAP, the Mine-Resistant Ambush348Protective vehicles, the use of the Defense Production Act was349critical to help produce those vehicles, and then we all saw350the power of DPA [Defense Production Act] during COVID.351    Overall, our legislative authorities are strong, but I352think there are several opportunities before us. The first, as353you know, DPA is up for reauthorization this year. DPA has had354tremendous impact on rebuilding and shoring industrial base355capacity, and it is essential to reauthorize DPA and keep it356focused exclusively on national security issues, particularly357threats from China.358    DPA Title III is an important tool for building industrial359capacity. The use of purchase commitments under Title III would360be a great way to enable strong demand signal for industrial361capacity and capabilities such as specialty chemicals and362critical materials. But currently, purchase commitments are not363allowed, or not enabled, because the DPA funds are being364appropriated with procurement dollars, which expire, as opposed365to traditional DPA appropriations, which do not expire.366    there is a real opportunity in another section DPA, Title367VII, where we have two sections of authority that have not been368used since the cold war, that are really powerful. One is369section 708, which allows the creation of voluntary agreements370between government and industry that allows collaborative371industry-government engagement on critical supply issues. We372have a few of these available now, but if we would really kind373of invest in these efforts, we could have that collaboration we374had during the War Production Board years.375    The second section is Section 710, which allows the376creation of what is called a National Defense Executive377Reserve, which is essentially a group of industry experts that378can come into government during a crisis. This is a tremendous379authority that has not been used since the 1980's.380    the other thing we need to do on the planning side is we381have to restart mobilization planning. That ended in the early3821990's. We have to build this across the U.S. Government, and383then we also have to relook some of the executive orders that384govern DPA.385    Transitioning from authorities to our capabilities, we386really have to focus on turbocharging our efforts to change how387we design, resource, acquire, and sustain capabilities. As the388Ranking Member talked about, it is not just about acquisition389reform. It is about how we buy. We have to design things for390production. We have to focus less on requirements and have more391adaptive ways to create technologies. More resources would be392helpful, of course, but another way that we can go beyond393appropriations is to really tap the power of U.S. capital394markets as one of our strengths. So building on the authority395that you all created with the Office of Strategic Capital,396there is opportunity to grow the scale of investments, so397private capital can make larger bets in investments.398    On the areas of production, we have gotten the prototyping399game down, but it is really now the time to transition more to400production, and there are ways to do that through other401transaction, follow-on production agreements, more buying of402attritable systems and unmanned systems, and the like.403    Then finally the area of sustainment is, frankly, our404biggest challenge, being able to do logistics at scale, and405there we can actually do things like create contract line406items, or CLINs, that develop surge capacities. So instead of407having canalized, very limited supply runs, you can have the408ability to grow that. Also, second sourcing and multi-sourcing409are important options to be able to create more capacity.410    One final point I would like to make is on allies and411partners. Our recent experience has made it crystal clear we412need a larger industrial base. Engaging our closest allies,413those with whom we go to war, through robust industrial414partnerships will help us build overall capacity.415    Unfortunately, time is not on our side. If the Davidson416window is correct, we have 2 years, and it takes a while, as417the Senator alluded to, to mobilize. The Trump administration418and Congress, in partnership with industry and our allies and419partners, must harness innovation, manufacturing capacity, and420other means to unleash the true strength of our industrial base421to deter our enemies in today's very dangerous world. The time422to do this is now, before the balloon goes up. Thank you very423much.424    [The prepared statement of Dr. John G. McGinn follows:]425426    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]427428    Senator Fischer. Thank you, Dr. McGinn. Dr. Michienzi.429430  STATEMENT OF CHRISTINE MICHIENZI, Ph.D., FOUNDER AND CHIEF431  EXECUTIVE OFFICER, MMR DEFENSE SOLUTIONS, AND FORMER SENIOR432   TECHNOLOGY ADVISOR TO THE UNDER SECRETARY OF DEFENSE FOR433                  ACQUISITION AND SUSTAINMENT434435    Dr. Michienzi. Thank you, Chairman Fischer, Ranking Member436Reed, and distinguished members of the Committee for the437opportunity to speak with you today on defense modernization,438which is essential for our Nation's security.439    The defense industrial base necessary to build our DOD440systems is fragile, but this fragility did not happen441overnight. Key decisions by the U.S. Government and industry442have played a very large role. For instance, decades-long443private sector and public policy approaches to domestic444production prioritized low, short-term costs over security,445sustainability, and resilience. So the industrial base has446become optimized for efficiency and not resiliency.447    Just-in-time deliveries versus inventories of long lead448time items cut warehousing costs and increased efficiency but449limits industry's flexibility and responsiveness. The DIB450[Defense Industrial Base] has many single and sole-source451suppliers due to the decades of consolidation. Often those are452foreign adversarial sources that are cheaper but can introduce453risk.454    At OSD [Office of the Secretary of Defense], I was in the455trenches of mobilization efforts for almost a decade. I was the456lead for DOD for scaling up production for all of the weapon457systems we were sending to Ukraine, a function I led for458various crisis scenarios since 2017. I was also very involved459in DOD's efforts in response to COVID-19, working with the460interagency partners, using the defense production authorities461Jerry talked about, Titles I, III, and VII, to execute CARES462Act funding to increase production of medical resources,463including prioritization and allocation of supplies, which464becomes important when we are trying to mobilize and surge, and465providing financial support to DOD's suppliers.466    As the United States is supporting two conflicts and467preparing for potential conflict in the Indo-Pacific region, it468has become clear that the DIB is not equipped to mobilize to469support the existing activities, much less a competition with470China. Although there are, and continue to be multiple efforts471aimed at mitigating shortfalls that support mobilization, there472are some systemic issues and causal factors that are not being473addressed.474    The most important of these is DOD's acquisition behavior.475I am not referring to acquisition reform here, such as476different ways of doing contracting, but to the decisions that477are made by the acquisition community that are the root causes478of many of our supply chain issues.479    The industrial base is very seldom a consideration when480most acquisition programs make certain decisions, such as481increasing or decreasing procurement quantities, or even482analysis during major milestone decisions. When mitigating483supply chain issues, DOD is often treating the symptoms and not484the cause. I will highlight two representative examples, but485there are many more I can elaborate on.486    The government is funding efforts to reshore and ally shore487critical supply chains, and partners and allies are critical to488solving this issue. However, if we do not bring demand back to489those more secure sources, they will not survive. Even though490DOD programs have the authority to direct sources of supply,491they most often do not, letting industry choose. Because492industry is profit driven, they will almost always choose the493cheapest source, which is unfortunately often a Chinese or494other adversarial source, or a more secure source.495    DOD reinforces this behavior by choosing the lower-cost496proposal among technically equal options. Industry will not497risk losing a contract by using a higher-cost supplier, even if498that supplier is more secure. DOD also does not like to direct499sourcing because it shifts liability from industry to500government if something goes wrong with that material or501component. But if we are truly going to have secure suppliers502for these critical items, DOD and other agencies, because DOD503is often only 1 to 2 percent of the demand, should be required504to use a U.S. or allied source if one is available, that meets505requirements, and also to incentivize industry to use those506sources with policies, such as price preferences and contract507selection, for instance.508    Another example is one of the major constraints we face509when scaling production for weapon systems for Ukraine and510other crises, and something that continually plagues DOD, which511is obsolescence. The way DOD deals with obsolescence is512reactive and ad hoc, at best. With a few exceptions, programs513do not plan or budget for obsolescence, choosing instead to514wait until an obsolescence issue occurs to determine a515mitigation plan and scramble to find funding to execute that516plan before time runs out.517    Obsolescence was the main reason we could not make more518Stinger and PAC-3 Patriot missiles when the Ukraine conflict519started initially. Acquisition program managers and even520service acquisition executives have told me they cannot afford521to budget for obsolescence, but many studies have shown that522being proactive by planning and budgeting in advance saves time523and cost. Programs should be required to plan and budget to524deal with obsolescence more proactively.525    Last, as we have been trying to mobilize the DIB to support526various efforts, I am often asked why can't we do what we did527in World War II, as described in the book, Freedom's Forge. I528gave a lecture each year on mobilization to the entire class of529the National Defense University's Eisenhower School, and one of530the slides I always presented was ``Why not Freedom's Forge?''531Where I outlined the conditions that were very different532between what was happening, and Senator Reed mentioned one of533those, and what is happening now that make it impossible to534replicate that scenario. I am happy to discuss these in further535detail.536    I will stop there by saying I appreciate the Committee's537leadership and focus on this strategic topic and in helping in538any way I can. I have submitted written testimony for the539record, and I thank you for the opportunity to testify today,540and am happy to answer any questions you may have.541    [The prepared statement of Dr. Christine Michienzi542follows:]543544    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]545546    Senator Fischer. Thank you, Dr. Michienzi.547    Mr. Berteau, you are recognized for your opening statement.548549  STATEMENT OF THE HONORABLE DAVID J. BERTEAU, PRESIDENT AND550     CHIEF EXECUTIVE OFFICER, PROFESSIONAL SERVICES COUNCIL551552    Mr. Berteau. Thank you, Senator Fischer, Senator Reed, and553the Committee. We really appreciate the opportunity to be here554today.555    I am David Berteau. I am the President and CEO [Chief556Executive Officer] of a trade association, the Professional557Services Council. What I need to reflect for the record is I am558here today in my personal capacity, and opinions and559suggestions that I make today are my own and not those of my560organization, who would otherwise be considered guilty.561    There has been a lot of talk about the World War II example562of full-scale mobilization, and really in American history we563have really only had two such examples, the other one really564being the Civil War. As old as I am, I was not alive to565participate in World War II, as part of that process, but my566experience is actually in a different segment that has already567been touched on a little, and that is the cold war, and568particularly the Reagan buildup during the cold war.569    I arrived at the Pentagon in 1981, served there until 1993,570and was very actively involved in a number of issues there.571There are a couple of lessons I would like to propose to you572from that period of time, that may be relevant to the573discussion today.574    The first is that we actually had an operational plan and a575scenario on which we could calculate what our mobilization576requirements were. It was, in fact, Soviet tanks coming through577the Fulda Gap in Germany and invading Europe. That was the578driver. That was the thing that if we did not prevail there, we579would go nuclear, and a global nuclear war was clearly not an580option we wanted to pursue, although we were prepared for that.581    How were we able to use that? We were able to build the582requirements and actually secure the funding from the Congress,583because we had a common agreement between the White House, the584Pentagon, and the Congress as to what the threat was we were585facing and what the scenarios were on which we would have to586plan and be prepared to execute. So the first thing is we had587that common ground.588    I do not think we have that today, and I think one of the589most important things this Committee can do is drive us to get590that common understanding of what the scenario is. We had an591operational plan, which is the fight today piece, and then we592had a scenario which is how that evolves over time. We need593that in place today.594    By the way, by being able to do that, we were able to595propose funding for surge capacity, for war reserve spares, for596training, for sustainment investments, for actually deploying597and being able to show that we were able to do this, and the598appropriators would give us that money because it was justified599and everybody agreed on the basis for it. We don't have that600today.601    An example of that, in fact, one of the lessons from602Ukraine is the multiyear procurement for expanding munitions603production capacity. The Pentagon's first submission to the604Congress was decremented by a lot of the extra money that was605going to go into building the multiyear procurements for many606of those programs because there were higher priorities the607committees had to achieve than to put those in place.608Ultimately that got fixed, but it took a long time to get609agreement on that. So we have to have that agreed-upon set of610scenarios on which to base requirements.611    The second thing that we learned from that cold war612experience is the best way to deter was to demonstrate--613demonstrate, not put on paper, but demonstrate--that we had the614capacity to deliver that. So every year we would have massive615exercises, where we would literally deploy forces from the U.S.616and sustain those forces in operations in Europe, thousands and617thousands of troops from all the NATO [North Atlantic Treaty618Organization] countries combined, clearly showing the Soviets619that we could make it work. That demonstrated capacity, I620think, is the second key lesson.621    The third key lesson, that has been referred to a lot here,622is the partnership with industry, and that partnership with623industry is oftentimes an arm's length partnership. Dr.624Michienzi did a good job describing some of the flaws in that625process, and I think that partnership has to include long-term626contracts. It has to include stable designs, so you can627maximize productions. That is one of the biggest advantages we628actually had over Germany in World War II. Hitler and his team629could not stop putting change orders into programs because new630stuff would come along and they would actually stop production631in order to do it, whereas we would actually move those new632ideas into the next iteration of different aircraft, so we633maximized production while still getting the benefits of new634technology and research and development. We did that throughout635the war.636    The fourth lesson is the reliance on allies and partners.637Senator Reed, you mentioned INDOPACOM and the China threat. DOD638uses the word ``the pacing challenge.'' I think it is actually639much bigger than pacing, but it is the threat, but it is not640the only threat, and I think the big difference between even641the cold war as well as World War II is the changing nature of642the threat and the much more complex nature of that threat.643Allies and partners are a key piece to this.644    Then the fifth lesson, I think--and we did not really learn645this lesson very well through the Reagan buildup--is646mobilization is much more than just defense and much more than647the defense industry. It is the whole nation. You mentioned648workforce, sir, and we have got a shortage of workers. We have649kind of come out of that bathtub from COVID where we had twice650as many vacant jobs as we had people looking for work. But651throughout the industry, both in the production end and in the652services and sustainment end, we have got a shortage of workers653today that is continuing going forward there.654    So those are five lessons I think that would be useful for655this Committee to undertake. My one suggestion to you is I656think it is time--and I do not think you have time to wait--I657would suggest that this Committee direct DOD to do, between now658and the time you go to conference, a full-blown exercise of,659say, what do our mobilization requirements really look like,660what is the scenario on which we base that. You need that as a661Committee before you finalize the fiscal year 2026 National662Defense Authorization Act.663    With that I will--I have got negative time to yield back,664so I do not actually have any time to yield back, but I stand665ready for your questions.666    [The prepared statement of Mr. David J. Berteau follows:]667668                 Prepared Statement by David J. Berteau669    Chairman Wicker, Ranking Member Reed, Members of the Committee:670thank you for the opportunity to appear before you today to talk about671Defense Mobilization in the 21st Century. I'm David Berteau, President672and CEO of the Professional Services Council, but I appear before you673today in my personal capacity. I have a bit of history on this topic,674and my comments and suggestions today are my personal views.675    Oftentimes, the starting point for discussion about defense676mobilization is our American experience during World War II. The might677of industry was harnessed to defeat the Axis powers and secure peace.678Much has been written about that, and I suspect that the committee is679familiar with some of the historical lessons. I can go into some of680those during questions, if you desire.681               cold war mobilization planning (1981-1989)682    Let's look at a more recent period, the mobilization plans and683preparations during the Reagan buildup at the height of the cold war. I684was working at the center of that buildup for Defense Secretaries685Weinberger and Carlucci, and I draw some of the lessons from that time686that may be relevant for today.687    The Reagan buildup during the 1980's was driven by the need to688counter the Soviet threat in Europe. We built plans for surge in the689event of conflict and for mobilization in the event of protracted690conflict. Importantly, the Department of Defense programmed money--and691included it in the President's budget requests--to support those plans.692Because we had a solid, programmatic basis for those funding requests,693Congress appropriated funds in the billions of dollars.694    How did we justify that? The executive and legislative branches695held a shared view on the fundamental threat: a Soviet invasion of696central Europe through a geographic feature known as the Fulda Gap in697Germany. We had a clear understanding of Soviet forces, capability, and698intent. We built our force structure to respond to that threat. We699exercised, not on paper, but in the real world--deploying, sustaining,700and training U.S. armed forces to demonstrate our ability to respond to701an invasion. These exercises enabled us clearly to identify shortfalls702in weapon systems, munitions, material, logistics and support703(including port capability on both sides of the Atlantic), personnel,704and training. We worked to address those shortfalls through investments705in excess capacity in manufacturing and production, in stockpiling706parts and supplies, and in aligning repair cycle times with crew707training cycles. We bought, assembled, and forward deployed six army708divisions worth of material, equipment, and ammunition. Congress funded709these efforts because we had clear requirements that were tied to710actual operational plans and scenarios. Much of the funding would also711cover our needs for what we called ``leaser included cases,'' meaning712wars of smaller magnitude than the Soviet invasion of Europe.713    Today, it is much harder for us to replicate what we did in the7141980's. The threats are broader, deeper, and vastly more complicated,715including cyber-and space-based threats that are unconstrained by716geography. The basis for devising requirements is not a single717overwhelmingly prominent scenario against which we would plan for surge718and mobilization. Instead, we develop a range of sometimes redundant,719sometimes overly specific requirements based on multiple scenarios. Yet720to my knowledge, DOD does not have a set of scenarios on which everyone721agrees we should base the demand, the needs, the requirements, for722near-term surge in the event of conflict and longer-term mobilization723for protracted conflict.724    In other words, the first lesson from cold war mobilization plans725in the 1980's is the need for a comprehensive and agreed-upon set of726scenarios on which to base those requirements. These scenarios must727include the full panoply of threats.728    The second lesson of my cold war experience is that demonstrated729capability is the surest form of deterrence. It is vital to have more730than just paper plans in place. In those days, we demonstrated, with731real world exercises and deployments, the capability to deliver on732those plans. Of course, those demonstrations might fall short of what733we really needed in some areas, and I suspect the Soviets could see734that as well as we could. However, the best way to justify the735necessary expenditures to address shortfalls was to prove them. That's736what annual exercises did.737    The third lesson is the fundamental need for the government to738partner with industry. That partnership must include long-term739contracts, including stable designs that can maximize production rates740in parallel with the ability to incorporate innovations and new systems741and processes. Based on requirements, DOD must identify and fund needed742excess capacity. This partnership relies on mutual trust, with each743partner living up to its contractual commitments, including timely744payment of invoices.745    The fourth lesson is the essential importance of allies and746partners around the world. Those partnerships depend upon being able to747train, exercise, and ultimately fight together. There is no substitute748in this area for a common set of assumptions about scenarios and for749actual real-world practice.750    The fifth lesson, one to which we paid little attention at the751time, is that mobilization is far more than a Defense Department752undertaking. True national mobilization, such as America has only753experienced twice in our history, involves the entire national economy.754In my memory, DOD just assumed that would happen. We never actually755practiced it.756                           lessons for today757    What do those lessons mean for today and the coming decade?758    Today's threats are different, more diverse, and harder to respond759to. They include space and cyber threats and asymmetric responses to760the deployment, use, and sustainment of U.S. and allied forces. In a761report to DOD in 2012, I studied the force posture requirements of the762so-called ``pivot to Asia,'' and America was not then-and I suspect is763not today--ready to sustain a long-term conflict across the Pacific.764Complications might well arise in the form of conflict in Europe, on765the Korean peninsula, in the Middle East, or elsewhere.766    To me, the most important task that I draw from those lessons is767that the Nation needs a clearer understanding of what mobilization768requires. What are the demands? What happens if we don't meet them?769    I suggest that this Committee immediately require DOD to undertake770a comprehensive mobilization wargame, one that assumes the full array771of current and emerging threats, including truly contested logistics in772theater and around the world. The Committee could require that the773output of that wargame be a comprehensive, prioritized summary of needs774that are more than simply a list of stockpiled munitions or increased775production rates from weapon systems. The list of needs should also776include requirements for logistics and support, fuel resupply,777sustainment and repair, operational flexibility in theater, personnel778and training, and the impact of attrition from enemy forces.779    The list of needs should also address steps needed to maximize the780integration of government and industry. Among those needs are781improvements in the DOD acquisition system for all companies and a782focus on outcomes, including faster times to delivery of results.783    I suggest that the Committee direct such an undertaking be done784now, with the results provided to the Committee in time to incorporate785into conference negotiations for the final fiscal year 26 National786Defense Authorization Act. That timetable can help ensure your ability787to respond in this next bill rather than waiting another year.788    Chairman Wicker, Senator Reed, I think you again for the789opportunity to join you today. I have much more that I'd like to cover,790and I look forward to your questions. Thank you.791792    Senator Fischer. Thank you, Mr. Berteau.793    We will have 5-minute rounds, and I will begin with794questioning.795    I strongly believe the Administration should maximize its796use of the Defense Production Act. They have the authority to797address challenges in our defense industrial base. However, I798am concerned by the expanding definition of what qualifies as799national defense. For example, in 2022, President Biden invoked800the Defense Production Act to ramp up domestic production of801clean energy technologies.802    Dr. McGinn, how should the Defense Production Act be used803for defense mobilization? Should the DPA investments be focused804on areas clearly related to the national defense of this805country?806    Dr. McGinn. Thank you very much, Senator Fischer. Yes, the807Defense Production Act is an incredibly powerful tool, and it808is best used for national security defense purposes, and that809is how it has been used during the development of the MRAP810[mine resistant ambush protected vehicle] during the811Afghanistan and Iraq war, that is how it was used during COVID,812and that is how it is being used to rebuild our defense813industrial base in areas such as rare earth processing,814castings and forgings, and the like, specialty chemicals.815    So that is how it is best used, and the more it is focused816on national defense, it is not a political issue. Therefore, it817is a national security issue.818    Senator Fischer. Thank you, and Dr. McGinn, how should the819Act be used for defense mobilization? Should the investments be820focused on areas clearly related to being able to get that821done? I'm sorry, Dr. Michienzi.822    Dr. Michienzi. Thank you. I just wanted to make sure. Yes,823it should absolutely be focused on mobilization efforts, but824some of the efforts that DPA is funding now, it is difficult825sometimes to realize that those go toward mobilization. So826things that Jerry mentioned such as rare earth processing and827critical chemicals.828    Senator Fischer. Would you look at any statutory changes,829to be able to make it work and make it identify truly what is830national defense? Is there anything we need to be looking at831here?832    Dr. Michienzi. I think making sure that it is centered on833national defense issues and national security is critically834important, as Dr. McGinn mentioned, because we do not want to835dilute the efforts of the DPA that are being very successfully836used currently and can be used going forward.837    Senator Fischer. Okay. Thank you. Dr. McGinn, on January8382024, the Department released its first National Defense839Industrial Strategy, and later, in October, released an840implementation plan. What is your assessment of the strategy?841    Dr. McGinn. Well, I think the strategy did a very good job842at kind of bringing together a lot of efforts that have been843led across recent administrations. One of the interesting, good844things about this area is it is very bipartisan. There have845been a lot of similar themes being addressed across the Obama846administration, through the Trump administration first, through847Biden, and today.848    I think the strategy did a good job at identifying the849progress that has been made but also setting a vector for the850future. I think there were a number of good things in that851report. I particularly liked the focus on the importance of852production as well as the importance of working with allies and853partners. The key will be kind of how that is instantiated in854the 2026 budget submission.855    Senator Fischer. Are there any additional areas that you856would recommend the Department would consider that maybe we are857lacking from the previous strategies?858    Dr. McGinn. Yes, I think two things I would recommend. One859is mobilization. It is mentioned briefly in the strategy, but860there is no talk about restarting mobilization planning. There861actually are program elements in the Army, Navy, Air Force, and862Marines for mobilization, but they are really all about863prepositioning equipment and the like. There is no kind of864planning function that is being done today. That all stopped,865and that needs to be restarted.866    Then the other area, the strategy talks a lot about867building exportability in systems, that is building systems so868that we can share them with our partners and allies. That869requires investment, because you are going to have different870capability levels of different missiles, going to different871partners, depending on how close they are. So that requires872investments on the front, and if that is a big priority, that873needs to be invested in, in terms of making exportability a874priority in acquisition and also investing in the technology875needed to build that capability.876    Senator Fischer. Thank you. Senator Reed, you are877recognized.878    Senator Reed. Thank you very much, Senator Fischer. First,879let me commend you all on excellent testimoneys. Thank you.880Thank you very much.881    Mr. Berteau, we have seen a lot of chaotic initiatives over882the last several weeks, significant cuts of workforce, we have883seen funding cuts that do not seem to be organized, and tariffs884in place on Canada and other countries who presumably we would885like to see work with us.886    Can you indicate or give an idea about the impact on these887decisions with respect to mobilization of our industrial base?888    Mr. Berteau. Senator, let me think out loud with you a889little bit on that, because I do not have a prepared script to890answer that question. This is my eighth transition of one891President to the next. My first one was President Carter to892President Reagan, and every administration needs to, and does,893undertake to make sure that the programs and projects across894the Federal Government are in line with their priorities, and I895think that is a lot of what is underpinning the efforts we have896seen underway. It is being done differently than many have897done, and one of the differences is stopping things while you898are reviewing it rather than keep going while you are reviewing899it.900    I think from a governmentwide point of view, this has901caused a bunch of hiccups, but more importantly, there is a902second element of that review, and that is do not just focus on903the things you are going to stop, the money you are going to904save, the reductions in workforce, unnecessary workforce, that905you are going to do, and so on. You also have to focus on what906you want to not only keep going but go further and faster. I907think one of the things that we are trying to focus on is what908are those areas. Clearly national security is a huge piece of909that. Border security is another one. There are probably others910that will emerge as part of that process.911    So I think my personal concern is that you need to actually912undertake those places you are stopping or reducing or913realtering and keep in mind you need to be able to keep the914capacity and capability and competence in the government915contractor community to be able to work while you are going916forward. That is the touchstone, I think, that I would advise917this Committee to look at it for.918    If I could add one thing on the DPA.919    Senator Reed. Yes, sir.920    Mr. Berteau. It is up for reauthorization this year. It is921obviously not the jurisdiction of this Committee. I have been922through two DPA reauthorizations, including one in 1990, where923we actually let the Act expire under a veto threat because it924got loaded up, Senator Fischer, as you indicated, with a bunch925of things that did not really, from our perspective, contribute926to national defense, and we let the Act expire. That is a927dangerous time to do it. Saddam Hussein had just invaded928Kuwait, and we did it, but it turned out there were other929authorities we could use, for a short-term conflict such as930that.931    I do think this would be important, and input from this932Committee might be useful in that reauthorization in terms of933looking not only at how the DPA has been used over the previous934years but how it has not been used, and where you ought to view935it. I agree with Dr. McGinn in terms of Title VII. DPA worked936for me for a number of years. I exercised Title VII authority a937number of times, and I think it really needs a refresh, because938the nature in which DOD would use that authority today, in939today's global economy, is very different than it was in the9401980's.941    I am sorry for that sidebar, but I think that is an942important think for you guys to look at.943    Senator Reed. Thank you, sir. Your comments, Dr. McGinn. We944are running out of time, so if you could, with respect to the945present sort of turmoil that we are witnessing and the impact946on the industrial base.947    Dr. McGinn. Well, companies that support the government948play critical roles in lots of different functions. The big949thing that I am recommending is the importance of us restarting950mobilization planning. That is not going to be impacted because951it does not exist today.952    So that is something that has to be developed and is953inherently a governmental function.954    Senator Reed. Thank you very much. Dr. Michienzi, we are955much more reliant upon information technology and software-956based systems today than we were certainly in World War II and957other periods of mobilization. When it comes to planning and958preparing for industrial mobilization, how does this reliance959change the situation?960    Dr. Michienzi. Well, luckily software and software systems961have been, I would say, more adaptable than some of the962hardware systems, as DOD tries to move forward. So they do963things like agile acquisition, you know, refreshes and upgrades964quite quickly.965    So I think software is absolutely key to any mobilization966effort because that is what is controlling all of our command967and control, for instance, C4ISR [Command, Control,968Communications, Computers, Intelligence, Surveillance, and969Reconnaissance]. So yes, it is absolutely essential.970    Senator Reed. Thank you very much. Thank you, Madam971Chairman.972    Senator Fischer. Thank you, Senator Reed. Senator Rounds,973you are recognized.974    Senator Rounds. Thank you, Madam Chair. First of all, thank975you to all of you for being with us here today. We appreciate976the time that you are taking from your schedules.977    For all of you, the fiscal year 2025 defense bill includes978a provision from my office, Section 1074, a report on979operational plans of the Department of Defense, which requires980an assessment of the operational plans of the DOD in the event981of multiple, concurrent contingencies or protected conflicts.982This requirement reflects the reality that in the event the983U.S. engages in hostilities with China, other adversaries, such984as Russia and Iran, will press their own advantage in Europe,985the Middle East, and elsewhere. Basically talking about if we986have a conflict, we are going to have a conflict in more than987one area or one theater at a time.988    What are some of the considerations that we must take into989account when talking about a multi-theater mobilization, and990what are some of the key shortfalls that you believe the991Department should identify and highlight in their assessment?992Dr. Berteau, would you like to begin?993    Mr. Berteau. Thank you, Senator. Let me again go back a few994years. At the time of the cold war, we really only had one set995of scenarios that we cared about, and that was the Soviet996threat in Europe. Everything else was considered to be what we997called a ``lesser-included case.'' That means whatever force998structure and capability we would have to counter the Soviet999threat would probably be sufficient to counter any other1000threat.1001    After the end of the cold war, we changed that to several1002different iterations from a planning process point of view,1003including a two-war scenario, that essentially being the Middle1004East and Iran, Iraq, and the Korean Peninsula. It turns out,1005after 9/11, we discovered that lesser-included cases might be1006lesser but they were not included, so we had to have a big1007shift in terms of both our strategy and our force posture to1008deal with that.1009    In 2012, I was charted by DOD to do the first assessment of1010what the force posture would be needed for the pivot to Asia,1011and what I discovered is there was no basis for that. Again,1012this was a greater not included, rather than a lesser included.1013    So I think if you look at that evolution over time, the1014request of your provision is a very valuable and timely1015request. But it is important to note that that is only where we1016are today. So from the operational plan point of view it really1017focuses, from a combatant commander's point of view, of if I1018fight today, if I have to fight tomorrow, what do I have, what1019do I do, how do I use it, how do I sustain it, support it, et1020cetera.1021    I think it needs to be much broader than that, of what is1022it in day 50? What are the lessons from Ukraine and almost1023every war we have entered in? It may look like it is going to1024be short at the beginning; it keeps on going. So where are you1025at day 700? I think that is another element that is useful to1026add on there, sir.1027    Senator Rounds. Thank you. Dr. McGinn?1028    Dr. McGinn. Thank you, Senator. Yes, thank you very much1029for that provision. I think that is important to really focus1030on operational plannings. But one of the things that is missing1031in most operational planning is the role of industry. One of1032the things that we saw when supporting Ukraine is the challenge1033of production, that we have got to really kind of be able to1034ramp that up, and that requires really close government-1035industry collaboration.1036    During the cold war we had these voluntary agreements that1037created integrated committees, that were focused on the1038production of 155 munitions, that were actually non-FACA1039[Federal Advisory Committee Act] boards that allowed for close1040collaboration between government and industry on production1041issues.1042    So that needs to be part of the planning. We need to do the1043war games that have that, because you have seen the war games1044where if we have a Taiwan Strait scenario, we are out of1045Schlitz in 2 weeks on munitions.1046    So we have got tremendous kind of industrial implications1047to these operational scenarios that have to be part of the1048planning going forward.1049    Senator Rounds. Thank you. Dr. Michienzi?1050    Dr. Michienzi. Real quickly, I will just add that the1051National Defense Strategy drives how the Defense Department1052looks at operational planning. So the current National Defense1053Strategy stays focused on China. Previous National Defense1054Strategies did include multiple conflicts at the same time and1055looking at that from an operational planning perspective. So1056National Defense Strategy would be helpful here if we are going1057to really, truly look at that.1058    I do want to mention some of the impacts, though, are the1059types of munitions that we are going to use. In Ukraine, we are1060fighting mostly a ground war, so we are using a lot of1061artillery, mortars, things that we are absolutely not going to1062be using in a China fight. In a China fight we are focusing1063more on service launched, air launched long-range missiles. If1064we now have to add in another fight, say Korea, we are back to1065a partial ground war.1066    So it really matters which fights we are looking at as to1067which parts of the industrial base we are trying to ramp up.1068    Senator Rounds. Thank you. Thank you, Madam Chair.1069    Senator Fischer. Thank you, Senator Rounds. Senator King,1070you are recognized.1071    Senator King. Madam Chair, congratulations on your meteoric1072rise to the chairmanship. [Laughter]1073    Mr. Berteau, I was really interested in your approach1074during the Reagan years of defining the scenario and then1075defining the strategy to meet it. Isn't that what is done now?1076I would assume that is exactly what is done. Or is it being1077done in too broad a sense without focusing on particular1078scenarios that would require a particular response?1079    Mr. Berteau. So I should probably clarify my use of the1080words. So you have an operational plan which, from my1081perspective in history, is the today fight, with the forces1082today and the theaters they are in.1083    Scenarios can go beyond that, both in terms of time and in1084terms of geography. What we had in the cold war was almost no1085difference between the operational plan in the fight today and1086what the long-term scenario would look like.1087    Today, as we just heard in the discussion in response to1088Senator Rounds' question, we have a wide variety of potential1089conflicts that could arise. In addition, we have got----1090    Senator King. But still, shouldn't we, within that wide1091variety we should try to choose the most likely. You cannot1092just throw up your hands and say, ``We have a very complex1093situation, and therefore we can't have a specific response.''1094Should we not we be saying, ``Okay, this is the most likely1095scenario, and that is what we should be preparing for''?1096    Mr. Berteau. I think you are right, sir. You need to figure1097out what you are going to base your requirements on and what1098you are going to spend your money on, and what comes first. You1099have to have a mechanism for prioritization. I think it is1100probably a combination of likelihood and probability, and I am1101certainly not qualified to put those on there.1102    But it is also a question of where are the greatest1103stressors, and what are the vulnerabilities if we cannot meet1104those stressors. That could, in fact, require an integration1105across multiple scenarios to look at what is the aggregated or1106combined impact and effect and where are the greatest things1107where we need to put our resources first. We will never have1108enough money to do everything, so the question is where do you1109put it first.1110    Senator King. The likelihood. A very quick, easy question1111for everybody. Can we all agree that continuing resolutions1112absolutely are not part of the solution to this problem?1113    Mr. Berteau. Franklin Roosevelt did not face a single1114continuing resolution through the entire buildup to World War1115II and the execution thereof.1116    Dr. McGinn. Yes, I concur.1117    Senator King. All of you agree with that, and, of course,1118that is one of the difficulties that we are in now, and it1119creates all kinds of downstream effects with regard to the1120industrial base and preparation and everything else.1121    Thank you for that. Let the record show continuing1122resolutions are not the way to do business, particularly in the1123defense area.1124    All of you have mentioned something very interesting, which1125is allies are part of the solution, and it concerns me that we1126seem to be embarked on a course that at least is not1127encouraging to our allies, and in some cases is definitely1128poking our allies in the eye. Talk to me about the importance1129of allies in dealing with the production necessary for a1130significant conflict, whether it is Japan, the U.K. [United1131Kingdom], Canada, or other countries.1132    Dr. McGinn. Our allies are important, sir, a key part of1133our industrial base, and we have a number of agreements and1134collaborative programs. I mean, the largest fighter program in1135the world, the F-35, we have a dozen partner countries, I1136believe.1137    Senator King. So we cannot do this by ourselves. Is that a1138fair answer?1139    Dr. McGinn. That is correct.1140    Senator King. All of you are nodding. Could you say yes,1141because nods do not show up in the record.1142    Dr. Michienzi. Yes.1143    Mr. Berteau. Nods do not show up in the transcript either.1144    Senator King. Exactly. One of the problems is the1145consolidation within the defense industrial base. How do we go1146about expanding the options available? One suggestion we had1147from one witness earlier was to go to major manufacturing1148facilities, Ford Motor Company, for example, and getting them1149engaged in military production as well as making F-150's. How1150do we expand the industrial base? Everybody comes here and says1151we need to expand the industrial base. Give me some practical1152suggestions as to how that might happen.1153    Dr. McGinn. Senator, it is a great question, and I think,1154one, we have to recognize the consolidation of the industrial1155base that people talk about, it is largely a function of1156spending. During the cold war, during the 1980's, when Mr.1157Berteau was in the Pentagon, we were spending 5.5, 6 percent of1158GDP [Gross Domestic Product]. Now we are spending around 3. So1159you are going to have less companies in the overall system.1160    Then something that Dr. Michienzi mentioned is that when1161your acquisition is focused on efficiencies, you want to buy1162the right system, for the right time, and what that ends up1163with is very limited production runs and/or production runs1164that last for, you know, when you have platform programs like1165the F-35, the Bradley fighting vehicle, the Abrams tank, they1166last for 40 years. So you have a prime contractor that has that1167market position.1168    So my argument is that we have to change how we buy, which1169means buying more systems, buying from multiple sources, and1170you can do that very much with unmanned systems. With some of1171the platform systems you can do that, as well. There has been a1172lot of work done on second-sourcing back in the 1970's and11731980's, where we were buying munitions from two suppliers and1174that reduces costs.1175    So there are ways you can increase competition by changing1176your buying approach, and that has to get away from some of the1177efficiency focus and more on what capabilities and capacities1178do we need.1179    Senator King. Well, and one of the particular things that1180ought to be part of this is modularity, so that you can upgrade1181without having to upgrade the entire platform.1182    Dr. McGinn. Madam Chair, would you indulge me for one1183sentence? We just do not buy enough to keep more companies in1184business. We just do not buy enough. The reason we only have11852\1/2\ manufacturers of tactical missiles is we only buy enough1186to keep 2\1/2\ companies in business.1187    Senator King. Thank you. Thank you, Madam Chair.1188    Senator Fischer. Thank you, Senator King. Senator Sheehy,1189you are recognized.1190    Senator Sheehy. Thanks for appearing today. Mr. Berteau,1191you talked about the World War II construct obviously with1192regard to revisioning of product specifications and how we1193evolved that.1194    I share the same concern, though, with regard to the1195customer has created this problem, i.e., the Pentagon has1196created this defense consolidation and the brittle supply chain1197we have. I am not confident that the government can be the1198solution to it either. How do we incentivize the industry, free1199market solutions, to actually create a resilient and1200diversified supply chain, rebuild the industrial base in a way1201that's resilient for a sustained conflict.1202    Because during World War II, Japan and Germany had a very1203centralized defense acquisition ministry, specified everything1204from on high, and tried to control the entire process from A to1205Z. That worked very well early on, but it could not keep up1206with the sheer quantity required, and there is a certain amount1207of quality in quantity. So that strength, for us, came from the1208free market. It came from private companies, working in1209coordination, of course, with the government.1210    But how do we take defense base that has largely been1211atrophied to the point of almost non-existence for quantity-1212level manufacturing, and how do we incentivize the free market1213to outpace the government in fixing this solution?1214    Mr. Berteau. Thank you, Senator. There are two ways to1215approach that. When I got to the Pentagon, there is this famous1216chart, if we went from 51 prime contractors down to 5. When I1217got to the Pentagon, all 51 were there. Why did they go away,1218during a buildup in which we were doubling the size of1219procurement and research and development expenditures in DOD?1220    They went away for three reasons. No. 1 is even with those1221more dollars, there was not more quantity to buy. Second is we1222began to put more and more regulations on top, the compliance1223regulations. I am working on, and I will be glad to provide it1224to the Committee when I am finished, a comparison of the1225compliance requirements that a government contractor has, not1226just defense contractors but any government contractor, and1227what happens in the private sector. It is a list of at least 151228or 20 things that cost more, take time, and do not really1229improve results, in my opinion. I think that is an important1230piece of it, as well.1231    Ford Aerospace, Fairchild Industries, Sperry, Bose, GM1232[General Motors], they all went out of the defense business, in1233the middle of the buildup, because it was, two things. It was1234no longer--time, value, money in the private sector is way1235different than the time, value, money in DOD. So the returns1236were not there. The opportunities for better returns elsewhere1237were there.1238    So you have to be able to counter that with government1239policies and programs that offset that risk-reward basis that1240the financial market is always looking for. I think that can be1241done, but that is not the path we are on right now.1242    Senator Sheehy. So for any of you who choose to answer,1243then, how does the government remove the bureaucratic red tape1244that really creates the sclerosis in the acquisition chain,1245that disincentivizes companies from wanting to do business with1246the Pentagon, that we do not have to have SpaceX and Palentir1247sue the government to buy a solution that is better for the1248warfighter. That is what has been going on. A better solution1249could be sitting on the shelf, but since it does not comport1250with a dizzying array of byzantine regulations, either it is1251not purchased or that company has to sue the government to give1252the warfighter the equipment they need. So how do we change1253those regulations, quickly, internally, so people want to do1254business and want to support the warfighter?1255    Dr. McGinn. Yes, great question, Senator. I would start,1256again, what is unique about the government contracting system1257is it is a monopsony. You have one buyer or different sets of1258buyers. They can set the market.1259    So the power is in the hands of the government or the1260Department of Defense to change incentive structures, because1261companies--private companies, public companies--they respond to1262incentives. So the onus is on the Department to change those1263incentive structures, and Congress can help here, and a couple1264of ways that we can do that, that will create more1265opportunities for companies across the spectrum, is to bring1266the power of our capital system that you allude to, to bear.1267Because if we want to build factories in advance of need, that1268can be done through the government investing, but we are not1269going to be doing any more big CHIPs bills, that kind of1270government investment.1271    But if you incentivize companies and create offtake1272agreements or financing programs that enable them to make a bet1273at below market rates, like the Department of Energy has, and1274builds off what the Office of Strategic Capital is doing, that1275is how you get lots of money, which is there, the private1276equity and venture capital money, to invest. That will help1277build capacity and build competitors for the Dept.1278    Dr. Michienzi. Can I just add one quick thing? I think1279there also needs to be a recognition of risk acceptance in the1280Department. Contracting officers are personally liable for if1281something goes wrong with the contracting. Program managers are1282promoted if they produce things and nothing goes wrong.1283    So there is a very low risk tolerance in the Department,1284and I think that contributes to the fact of not introducing new1285supplies, not wanting to change things, not wanting to bring in1286new industries. So I think there needs to be that piece of it1287that accounts for it, as well.1288    Senator Sheehy. Thank you. Quantity, iteration, and speed1289are key, and what won World War II for us was not the1290capability of our technology. It was our ability to build lots1291of things fast and get them in the hands of our warfighter, so1292we have got to get back to that. Thank you.1293    Senator Fischer. Thank you, Senator Sheehy. Senator Kaine,1294you are recognized.1295    Senator Kaine. Thank you, Senator Fischer, and thanks to1296our witnesses.1297    My concern about mobilization is heavily on the workforce1298side, and I think maybe because I am on the Health, Education,1299Labor, Pension I look at a lot of things through this workforce1300angle. But also in my dialog with our shipbuilders and ship1301repairs in Virginia and elsewhere, I am very, very nervous1302about us not having the workforce we need.1303    I think this is sort of a long-term problem with birth1304rates declining, and they are not going to change immediately,1305and if they did we would not see it for 25 years. So I think1306there are some big picture solutions like a workforce-based1307immigration reform that we are going to have to grapple with to1308get this right.1309    But I would love it if each of you could just address1310workforce strategies to help us with mobilization, and maybe1311even include workforce strategies that we could do jointly with1312allies. I will start with Mr. Berteau, because I know you1313talked about workforce in your opening statement.1314    Mr. Berteau. Thank you, Senator Kaine. A lot of what we1315have already talked about has an impact on that, but I think1316there are two additional points that I would like to make here.1317One is, in fact, the impact of COVID and both the inflation and1318general costs and the increasing costs of labor over the last 51319years.1320    Many defense companies, and many other contractors in the1321rest of the Federal Government have bids that were put in1322place, accepted by the government, and contracts currently1323underway, that made assumptions about zero percent interest1324rate, very low inflation, a balance between job vacancies and1325those seeking to work, so a stable workforce, low unemployment.1326None of that is true over the last 5 years.1327    Many of those contracts have not been adjusted. In fact,1328DOD is still issuing contracts today with an annual inflation1329clause of somewhere 1 or 1.2 percent, both for workforce, for1330wages and benefits, and for other costs associated with that.1331That is not only unrealistic, it leads companies to bid1332proposals that are inexecutable in the end.1333    What have we done about this? This Committee actually put1334some language in a couple of years ago in the NDAA--I think it1335was 3 years ago now--that gave the Defense Department the1336flexibility, where funds were available, to offset some of1337those costs. We have seen very little effort on the part of the1338Defense Department to look at those economic price adjustments1339come into play.1340    What is the result? You know this. You have got a starting1341welder salary at a shipyard, or even after a year of1342experience, that is substantially less than what that person1343can make at Walmart or Costco--not standing out in the cold or1344the heat. I mean, welding is an honorable profession, but it is1345hard work. I am not saying being a warehouseman at Costco is1346not hard work, but it is a lot easier on the body.1347    So we have got to offset some of that or else we are never1348going to climb out of this hole.1349    Senator Kaine. Could I ask Dr. McGinn and Dr. Michienzi.1350    Dr. McGinn. Yes, thank you very much, Senator. I think one1351of the strengths of the workforce, the defense industrial base1352workforce, is the nature of the business. Unlike commercial1353industries, we generally have longer-term contracts, 5-year1354contracts, or 1-year with four options, that enables stability1355in the workforce. It enables companies to plan for the future.1356    However, when you have continuing resolutions, as Senator1357King mentioned, and you have stability in budget, it makes it1358harder for companies to do that. So the more that Congress and1359the Department can create stable demand signals--and that is1360through things, like I mentioned, if you do purchase1361commitments for certain capabilities that you need, or you do1362multiyear procurement contracts, that enables kind of the1363stability to grow and stabilize workforce.1364    Senator Kaine. Great. Dr. Michienzi, you have got a minute136515, but the Chair may let you go just a little bit longer.1366    Dr. Michienzi. Okay, thank you. It is a great question, and1367I have been involved in this very much as we have been scaling1368up production for Ukraine and other obstacles.1369    You know, the quickest way to scale up is to increase1370capacity, if you are not already operating at full scale. But1371you need people for that, and it was always an issue to get the1372people, even if you had excess capacity, getting people to come1373on board to observe that excess capacity was difficult.1374    A lot of it has to do with areas that these plants are1375located in. By design, they are in rural kind of areas that are1376not near exciting cities, so young people do not want to move1377there. So I think things that can build infrastructure and make1378those places better for young people and make them want to go1379there and want to stay would be helpful.1380    It also goes to, when we were growing up we wanted our kids1381all to be engineers, right, not technicians. That was not1382considered a valued job description. So we need to make being a1383technician exciting, and there are some efforts in the1384Department to do that. So make sure that they understand that1385what they are doing is important, it goes direct to the1386warfighter, et cetera.1387    Last, for allies, I have done a lot of work in that area. I1388was the lead for the Guided Weapons Explosive Ordnance Program1389with Australia. One of the things that we had proposed was, as1390they were trying to ramp up their capacity to make munitions in1391Australia, which they have not done in a long time, bring some1392of their folks over to train here and fill some of the1393workforce shortages that we had here, so it is a win-win. That1394is something that we should pursue.1395    Senator Kaine. Which is sort of what we are doing with1396AUKUS [Australia, United Kingdom, United States] a little bit.1397We have Aussie shipbuilders and sailors here, training with us,1398so they can go back and do the same thing.1399    Dr. Michienzi. We need to do more.1400    Senator Kaine. Yes. Thank you very much. Thanks, Senator1401Fischer.1402    Senator Fischer. Thank you, Senator Kaine. At this time I1403would like to ask unanimous consent to enter Chairman Wicker's1404prepared statement into the record.1405    Senator Fischer. This concludes today's hearing. I would1406like to thank the witnesses for their testimony, and we are1407adjourned.1408    [Whereupon, at 10:29 a.m., the Committee adjourned.]14091410    [Questions for the record with answers supplied follow:]14111412               Questions Submitted by Senator Tom Cotton1413                         defense production act1414    1. Senator Cotton. Dr. McGinn and Dr. Michienzi, the Defense1415Production Act (DPA) is one of the most important tools the Department1416of Defense (DOD) possesses to revitalize our woefully inadequate1417defense industrial base. Yet, DOD has historically struggled to1418effectively utilize the program, and the previous administration used1419DPA to fulfill non-critical priorities instead of defense needs. How1420should we reform the Defense Production Act to better suit DOD's needs?1421    Dr. McGinn. DPA is indeed a very powerful Presidential authority.1422As I noted in my testimony, I believe that it is critical ``to keep DPA1423focused exclusively on essential defense and national security issues,1424in particular threats from China.'' \1\ I also proposed some specific1425recommendations to strengthen the DPA for the future:1426---------------------------------------------------------------------------1427    \1\ John G. McGinn, Testimony on Defense Mobilization in the 21st1428Century, U.S. Senate Committee on Armed Services hearing, March 6,14292025. Available at https://www.armed-services.senate.gov/hearings/to-1430receive-testimony-on-defense-mobilization-in-the-21st-century (accessed1431May 12, 2025).14321433      DPA Title I--Update executive orders and regulations. At1434the national level, the DPA is governed by a number of old and1435overlapping executive orders spanning numerous administrations that1436need to be refreshed and simplified. The Trump Administration should1437conduct a thorough review of relevant executive orders and regulations1438to better orient DPA policies and practices to address future national1439security challenges. \2\1440---------------------------------------------------------------------------1441    \2\ Jerry McGinn and Daniel Kaniewski, ``Where does the Defense1442Production Act Go from Here? Key aspects need strengthening,'' Defense1443One, November 24, 2020. Available at https://www.defenseone.com/ideas/14442020/11/where-does-defense-production-act-go-here/170301/ (accessed1445April 11, 2024).14461447      DPA Title III--Delegate determination authority and use1448purchase commitment authority. Title III is a tremendous tool for1449building industrial capacity. The non-delegable requirement for the1450president's signature on each DPA determination, however, has1451significantly slowed the process by which DPA projects are developed1452and executed. Allowing the delegation of that determination in the1453upcoming 2025 reauthorization of the DPA, perhaps to the Secretary1454level of those agencies with Title III authority,\3\ would1455significantly streamline the development of Title III projects.1456---------------------------------------------------------------------------1457    \3\ Currently DOD, the Department of Homeland Security, the1458Department of Energy, and the Department of Health and Human Services1459have been delegated DPA Title III authority.14601461       Another significant improvement would be the use of purchase1462commitments under Title III. All existing Title III projects are1463purchases under Section 303 of the DPA, but the authority also permits1464multiyear purchase commitments. Purchase commitments would allow DOD to1465create a guaranteed demand signal for an industrial capability over a1466mutually agreed upon period, thereby reducing risks for industry to1467make their own investments.\4\ Adding several purchase commitment1468projects could significantly help maintain capacity levels in areas1469such as critical materials and specialty chemicals to support future1470mobilization efforts. Purchase commitments, however, have not been an1471option recently because Congress has appropriated DPA funds over the1472past 3 years using standard Procurement funds which expire in 2 years,1473contrary to traditional DPA appropriations, which do not expire.1474---------------------------------------------------------------------------1475    \4\ Office of the Assistant Secretary of Defense (Industrial Base1476Policy) briefing, Defense Production Act Title III. Available at1477https://www.businessdefense.gov/ibr/mceip/dpai/dpat3/docs/DPA-TitleIII-1478Overview.pdf (accessed April 11, 2024).14791480      DPA Title VII--Relook the use of voluntary agreements and1481the National Defense Executive Reserve (NDER). Two sections of DPA1482Title VII have been scarcely used since the end of the cold war but1483present a tremendous opportunity for future industrial mobilization.1484Section 708 permits the government to establish voluntary agreements or1485plans of action with industry ``to help provide for the national1486defense.'' \5\ The Administration, for example, could establish1487voluntary agreements to prepare stand-by industrial capacity for1488potential surge use during conflict. Further, these agreements could1489enable dynamic government-industry collaboration on production issues1490such as that during WWII's War Production Board. Section 710 of Title1491VII also permits the President to establish a NDER, a volunteer group1492of industrial executives to support mobilization efforts. The1493Administration should examine the utility of this authority to form on-1494call groups of industry experts to serve in government during national1495emergencies. The Baroni team just completed a project addressing these1496two sections that can inform these efforts when published.1497---------------------------------------------------------------------------1498    \5\ 50 U.S.C. Sec. 4558(c)(1); Section 708(c)(1) of the DPA. See1499also, Neenan and Nicastro, The Defense Production Act, pp. 15-16.1500---------------------------------------------------------------------------1501    Dr. Michienzi. The DPA program at DOD has undergone major changes1502in the last couple of years that have made it much more effective than1503it had been previously. They have been able to have Presidential1504Determinations (required to spend DPA funds) approved that are broader1505in scope to help mitigate a larger number of industrial base1506shortfalls; they are able to use contracting vehicles--including an OTA1507that was approved last year--and other contracting entities besides1508Wright Patterson Air Force Base, which has made awarding grants much1509faster. The DPA executed almost one billion dollars in grants last1510year--proving that it is more efficient and effective than it was in1511the past. However, even with these changes, the DPA is not as1512responsive as it should/could be. A number of things could improve the1513use of the DPA--in peacetime, but especially in times of conflict or1514other crises.15151516    i. Delegating authority to fund industrial base shortfalls to the1517Secretary of Defense instead of the President. The current process to1518staff a package to the Secretary of Defense for approval prior to1519staffing it at the White House for the President's signature takes1520approximately 1 year. That timeline is no conducive to being responsive1521to industrial base issues.15221523    ii. Additional funding. The DPA needs to cover industrial base1524shortfalls in all sectors, so even though one billion dollars is a lot1525of money, it has to cover too much. Additional funding would enhance1526the DPA's effectiveness.15271528    iii. Restoring non-expiring funding. Without this, the DPA cannot1529issue purchase commitments, which is one of the most powerful aspects1530of the DPA--especially as the U.S. is trying to reshore critical1531industrial base capabilities. Providing grants solves the supply issue,1532but the demand issue will still remain, and those investments will be1533wasted if there isn't a means to bring demand to those new suppliers.1534Having off-take agreements and purchase commitments is one of the best1535ways to provide that demand.15361537    iv. Although all Titles (I, III, and VII) of the DPA can and should1538be used by other agencies under the right circumstances (response to1539COVID-19 for instance), the funding supplied to DOD's DPA Title III1540program should be used solely for defense purposes--to support1541industrial base shortfalls that have a direct tie to DOD systems. If1542other agencies, Congress, or the Administration wish to use DPA Title1543III authorities and grants, they should acquire separate appropriations1544to do so.15451546    v. DOD should make better use of provisions of Title VII of the DPA1547to 1) establish voluntary agreements with private industry to develop1548collaborative plans of action for national defense, including1549mitigating industrial base shortfalls--participants are granted relief1550from specific antitrust laws (Section 708), and 2) establish a1551volunteer pool of industry executives (National Defense Executive1552Reserve (NDER)) who could be called to government service in the event1553of a national defense emergency (Section 710).15541555    2. Senator Cotton. Dr. McGinn and Dr. Michienzi, do you believe1556congressional oversight of DPA would be more effective with1557congressional oversight by the Armed Services Committees?1558    Dr. McGinn. I defer to the congressional Committees to determine1559the best manner of oversight of the DPA.1560    Dr. Michienzi. I do not believe that there needs to be additional1561congressional oversight of the DPA.1562                                arsenals1563    3. Senator Cotton. Mr. Berteau, Dr. McGinn, Dr. Michienzi, while1564DOD has begun to modernize its organic industrial base, it is still not1565fully utilizing its arsenals and ammunition plants. Arsenals, including1566the one in Pine Bluff, Arkansas, are struggling to secure funding to1567modernize its facilities and boost output. How should DOD utilize1568existing arsenals and ammunition plants to expand desperately needed1569production capacity?1570    Mr. Berteau. Senator Cotton, the Defense Department's organic1571industrial base consists of the maintenance and repair depots,1572shipyards, arsenals, munitions assembly plants, etc. Together, these1573organic industrial base components provide capacity and capability for1574current operations and future needs. DOD balances its budget1575investments in these areas with all the other competing priorities in a1576budget request that always faces shortfalls. This Committee might1577assess the soon-to-be submitted President's Budget Request for fiscal1578year 2026 for those shortfalls.1579    There is a substantial negative impact on the organic industrial1580base, including arsenals, of short-term and repeated Continuing1581Resolutions. Pine Bluff will be better able to modernize its facilities1582and operations if Congress passes on-time full year appropriations for1583fiscal year 2026 and avoids both short-term and full-year Continuing1584Resolutions.1585    Dr. McGinn. DOD should use the most cost-effective manner to expand1586production capacity for munitions and other capabilities. Arsenals and1587depots in the organic industrial base should definitely be considered1588as part of that assessment by DOD.1589    Dr. Michienzi. Arsenals and ammunition plants have a role, but it1590is not to displace commercial industry. They should be used in sectors1591and for materials and components that are critically important to U.S.1592national security, that are DOD unique, and where poor business cases1593prevent private industry from maintaining capability and capacity. A1594prime example is 155mm ammunition, which is being used extensively in1595Ukraine. This is a DOD unique item that is critical for national1596security, and where private industry would have right sized itself to1597DOD demand (14,000 rounds a month prior to the Ukraine invasion).1598Luckily, the Scranton Army Ammunition Plant that produces those rounds1599had maintained some excess capacity, which allowed the Army to scale up1600production more quickly than having to expand or develop a new1601commercial facility. So where these conditions exist for other systems,1602the organic industrial base can and should be examined as an option.1603However, if there is enough demand and the item is commercial or has1604commercial applications, private industry will be best suited, as they1605will always be the most economical choice.1606    4. Senator Cotton. Mr. Berteau, Dr. McGinn, Dr. Michienzi, would1607you recommend using the arsenals to establish secondary sources of1608critical supply chain choke points, such as nitrocellulose?1609    Mr. Berteau. Senator Cotton, as this Committee and DOD continue to1610work on solving supply chain problems, it is useful to consider the1611potential of the arsenals to provide secondary sources of supply.1612    Dr. McGinn. The organic industrial base is often used to develop1613capabilities that are military unique or not part of the commercial1614supply chain. To that end, nitrocellulose is currently produced at the1615Radford Army Ammunition Plant. Having a second source for1616nitrocellulose and other specialty chemicals or materials would be1617beneficial if there is a business case for its development.1618    Dr. Michienzi. Given the above criteria, yes--this is a good use of1619the organic industrial base. DOD could split the procurement of these1620items to give just enough to the organic facilities to maintain the1621capability and capacity, while still utilizing mostly commercial1622industry, where available. Nitrocellulose is currently produced at1623Radford Army Ammunition Plant, so it may not be the best example, but1624there are plenty of other examples where this would apply.1625                           critical minerals1626    5. Senator Cotton. Dr. McGinn and Dr. Michienzi, can you explain1627why it is so dangerous for the United States to depend on Communist1628China for certain critical minerals?1629    Dr. McGinn. It is very dangerous for the United States to be in a1630sole or single source situation with critical minerals or other1631materials to a Chinese source because the Chinese government can shut1632down exports of these materials at any time. In 2010, China restricted1633the export of certain rare earth materials to Japan because of a trade1634dispute, causing a worldwide spike in rare earth prices. \6\ Recent1635rare earth export restrictions in response to increased tariffs has1636further demonstrated this danger. Despite over $400 million in1637industrial base investment since 2020 in the United States to rebuild1638domestic industrial capacity in rare earth processing, the Chinese1639still have tremendous market power in critical minerals that are vital1640for commercial and defense products.1641---------------------------------------------------------------------------1642    \6\ Keith Bradsher, ``China Bans Rare Earth Exports to Japan Amid1643Tension,'' New York Times September 23, 2010. Available at https://1644www.cnbc.com/2010/09/23/china-bans-rare-earth-exports-to-japan-amid-1645tension.html (Accessed December 10, 2024).1646---------------------------------------------------------------------------1647    Dr. Michienzi. Critical minerals are used ubiquitously in both1648commercial and defense systems. They are used in almost everything the1649DOD builds and uses, but also in military and civilian critical1650infrastructure, medical devices, IT and communication equipment, and1651household appliances--to name a few. China has already restricted the1652exports of a number of critical minerals, including some rare earth1653elements, which has DOD scrambling to examine stockpiles and1654inventories and racing to expedite development of non-Chinese sources.1655And it's not the mines that are the issues--the U.S. and its allies1656have plenty of mines for these materials. It's the processing and1657downstream product manufacture that are the issue because China1658controls a large percentage of these industries. What we've seen so far1659are just shots across the bow. China knows exactly where our industrial1660base pain points are, and they know how to weaponize them. Taken far1661enough, these export controls could cripple both military and civilian1662life.16631664    6. Senator Cotton. Dr. McGinn and Dr. Michienzi, how important is1665it that we pursue other sources of critical minerals outside of China,1666both domestically, and in other countries like Ukraine, for example?1667    Dr. McGinn. There are many sources for critical minerals outside of1668China. The United States and allies and partners such as Australia,1669Canada, Ukraine, and many others have deposits of critical minerals.1670The key, however, is the processing and refinement of these minerals1671and materials, not just the sourcing of the raw material. That is where1672China has the dominant market position. Increasing the capacity of1673domestic and allied sources for processing rare earths and other1674critical minerals should be the priority for near-term investments in1675my view.1676    Dr. Michienzi. Critically important due to the reasons listed1677above. However, processing and magnet making should be the priorities1678for DOD since there are plenty of mines for these materials outside1679China.1680                         foreign military sales1681    7. Senator Cotton. Dr. McGinn and Dr. Michienzi, you've discussed1682the importance of sending a clear demand signal to industry so it has1683the predictability it needs to invest strategically in its supply chain1684and facilities. In addition to signaling U.S. demand for equipment like1685munitions, how do foreign military sales play a role in sending1686industry clear demand signals?1687    Dr. McGinn. Foreign Military Sales (FMS) and direct commercial1688sales (DCS) send important demand signals to industry. FMS and DCS1689often help extend the life of a military program for years after the1690U.S. military stops buying them. The U.S. Army, for example, stopped1691purchasing Stinger missiles in 2002, but production continued for1692almost another 20 years based on FMS and DCS. Thus, when demand for1693Stingers suddenly spiked in response to Russia's invasion of Ukraine,1694there was a production line still in existence. Many other defense1695systems, such as the F-16 fighter jet and Patriot missiles, continue in1696production exclusively or largely because of FMS or DCS demand.1697    Dr. Michienzi. Foreign Military Sales (FMS) can augment U.S. demand1698to industry for DOD systems. However, studies have shown that FMS is1699not a reliable enough demand to fill the gaps created by inconsistent1700DOD and congressional funding. This is mainly due to the reluctance of1701foreign partners to provide information on their projected demand. Even1702when DOD tries to calculate what the demand might be by including1703requirements for foreign partners in operational plans, it requires1704knowledge of those partners' inventories, which they also will not1705provide. This leaves DOD and industry in the dark, thereby not1706providing what could be a better demand signal.1707                               __________1708                Questions Submitted by Senator Jack Reed1709                     impact of workforce reductions1710    8. Senator Reed. Mr. Berteau and Dr. Michienzi, how do you believe1711that the steep and indiscriminate workforce cuts that are being1712proposed by the Trump administration will impact the Department's1713efforts to plan and prepare for defense mobilization in the event of a1714large scale or protracted conflict?1715    Mr. Berteau. Senator Reed, I believe that DOD's total workforce1716(including military personnel, Federal civilian employees, and1717government contractors) MUST be aligned with its requirements. The1718reductions in force and employee terminations undertaken in the past1719few months exhibit no assessment of such requirements or alignment with1720personnel reduction goals.1721    In the 1980s, I managed two such efforts. First, DOD conducted the1722first and only assessment of Flag and General Officer requirements.1723This work resulted in a reduction of nearly 10 percent of such1724officers, downgrading some to lower-level officers, eliminating many,1725and even elevating the requirements for some positions. The recent1726announcement by DOD of Flag and General Officer cuts have no1727discernible connection to any assessment of actual requirements.1728    Second, under direction from this Committee, DOD conducted a full1729assessment of overall officer requirements, and the subsequent report1730to this Committee resulted in significant changes to DOD's officer1731corps in every military department, with some increases and many1732decreases.1733    Similar efforts for civilian employees and contractors are more1734difficult to undertake, because those workforces respond to1735requirements that are generated with the budget. Prudent management in1736DOD would align workforce with budgeted work. The Committee will need1737to assess the Fiscal Year 2026 President's Budget Request for evidence1738of such alignment of work with workforce.1739    Dr. Michienzi. DOD will need experienced people with expertise in1740multiple areas to prepare for defense mobilization. The current1741workforce cuts do not seem to be strategically planned to preserve that1742capability, while trying to achieve efficiencies. Developing a list of1743workforce skills necessary and matching it against requirements would1744make the effort more effective and still allow DOD to maintain the1745people necessary.17461747    9. Senator Reed. Mr. Berteau and Dr. Michienzi, in thinking about1748that, how do you think the proposed workforce cuts to other Federal1749agencies or entities that may support DOD in a whole-of-government1750effort for industrial mobilization will indirectly impact DOD efforts1751in this space?1752    Mr. Berteau. Senator Reed, in my experience, such assessments are1753vitally important and take some time. Workforce reductions in other1754agencies may or may not affect DOD, and this Committee should consider1755such effects as it marks up the Fiscal Year 2026 NDAA. I am not aware1756of any attempt at DOD or in the other Federal agencies to assess the1757impact on DOD of cuts in those agencies.1758    Dr. Michienzi. Preparing for defense mobilization requires a whole-1759of-government effort. For instance, the Department of Education to help1760with workforce training, the Department of Transportation to enable1761movements of people and equipment, the Department of Commerce and the1762U.S. Trade Representative to help balance trade and the flow of goods1763into and out of the U.S. while preserving U.S. capability. The same1764strategic planning should be done at these agencies to ensure the right1765skill sets and capabilities remain.17661767    10. Senator Reed. Mr. Berteau, are there any lessons from your time1768working in the Department during the Reagan administration that might1769be helpful to keep in mind?1770    Mr. Berteau. Senator Reed, I was in charge of overall DOD manpower1771requirements from 1986 through the end of the Reagan administration and1772continued in that role for the first 10 months of the following1773administration. The most important lessons include:17741775      DOD needs to assess workforce requirements and reflect in1776the President's Budget Request the resources needed to meet those1777requirements.17781779      DOD needs to consider the total costs of workforce in1780that assessment (keeping in mind that the full cost of contractors is1781known but the full cost of Federal civilians and military personnel is1782hidden in other accounts and hard to determine),17831784      DOD needs to consider the potential for surge capacity in1785that assessment.1786                     information technology issues1787    11. Senator Reed. Dr. Michienzi, to elaborate on my question to you1788on the challenges information technology (IT) and software-based1789systems pose for industrial mobilization, I am particularly interested1790in how the tangled supply chain for IT products-such as1791microelectronics or specialized materials-might be complicated in the1792event of a protected conflict with China. For instance, we saw how1793sanctions on Russia interdicted microelectronics to the point that it1794impacted how the Russians produced specific weapons. How are companies1795thinking about such supply chain disruptions might impact their ability1796to produce systems for DOD?1797    Dr. Michienzi. Unfortunately, much of the supply chain that1798supports IT products is global, and much of it lies in China and/or the1799Asia Pacific theater. For instance, although the U.S. still leads in1800the design of semiconductors, roughly 75 percent of semiconductor1801fabrication and 98 percent of the packaging of those semiconductors1802occurs in the in that theater. Taiwan accounts for about 60 percent,1803South Korea 13 percent, and China 12 percent. Compare that to the U.S.1804which only produces about 14 percent and produces NO state-of-the-art1805semiconductors, which are what are primarily used in IT products.1806Critical minerals, which are used in semiconductors and other IT sub-1807components are also primarily processed and made into finished goods1808such as IT systems in China. As we've seen with China's recent export1809controls, they can cutoff supply at any time, and this has already1810caused issues, with DOD scrambling to examine stockpiles and1811inventories and racing to expedite development of non-Chinese sources.1812Additionally, even if we are currently acquiring these things from1813allied nations such as South Korea, if a conflict should start between1814China and Taiwan, it will be difficult to ship anything from Asia-1815Pacific theater countries. Companies should have learned lessons about1816this during COVID-19, when supplies of critical items from some1817countries were scarce or non-existent. And some companies have begun1818looking at alternate or second source suppliers that are less risky.1819However, as long as industry is profit driven and the U.S. remains a1820free-market society, most of industry will use cheaper vs higher priced1821but more secure sources. This is where the U.S. should use industrial1822policy to combat this--something it is reluctant to do. Not using1823industrial policy solutions is an adequate strategy as long as there is1824a level playing field. But as we know, this is not, and has not been1825the case. Many countries--and especially our adversaries--do not play1826by the same rules:18271828    i. They provide subsidies to their industries, and many are state-1829owned:18301831    ii. They encourage over-production;18321833    iii. Which leads to dumping/flooding the market which drive prices1834down;18351836    iv. Which then drives out the competition, who cannot be cost-1837competitive;18381839    v. This captures market share--monopolizes markets;18401841    vi. They weaponize this advantage--as China has recently with1842gallium, germanium, graphite, and other critical minerals;18431844    China has used this to great effect to capture and dominate markets1845such as rare earths and lithium for EV batteries and is now attempting1846to do so for semiconductors. The CHIPS Act and the export controls1847Commerce has put in place for manufacturing equipment for advanced1848semiconductors are examples of where industrial policy is necessary and1849has slowed China down, but we will not be able to stop them. They are1850currently concentrating on legacy or trailing edge chips which dominate1851critical industries such as automotive, aircraft, appliances, cell1852phones, medical equipment, critical infrastructure, and DOD weapons1853systems, until such time as they can catch up on leading edge.18541855    12. Senator Reed. Dr. Michienzi, are you aware if DOD in planning1856for industrial mobilization is considering these sorts of supply chain1857disruptions, and how might they be considering alternative or fall back1858approaches for dealing with them?1859    Dr. Michienzi. Yes, DOD is very aware of these disruptions and has1860been tracking and mitigating them well before COVID-19 surfaced them1861for the general public and highlighted them for industry. OSD's office1862of Industrial Base Policy has made numerous investments, through both1863the Defense Production Act (DPA) Title III and Industrial Base Analysis1864and Sustainment (IBAS) programs, in critical capabilities within the1865U.S. where they have identified risks and issues. For example, during1866the previous administration, those programs invested 8$700 million to1867on-shore critical minerals mining, processing, and magnet making1868capabilities. They are encouraging industry to have better visibility1869and management of their supply chains, and they also work with the1870Services and Congress to provide incentives for using secure (U.S. or1871allied) sources vs. adversarial sources.1872                               __________1873             Questions Submitted by Senator Mazie K. Hirono1874             trump administration's civilian workforce cuts1875    13. Senator Hirono. Dr. Berteau and Dr. Michienzi, one of the1876biggest lessons learned from the World War II mobilization was that1877labor shortages were a huge challenge to increasing production. Given1878the potential for a conflict with China over the next several years, I1879would like you to comment on how President Trump, Elon Musk, and the1880Department of Government Efficiency's (DOGE) efforts of taking a1881chainsaw to the Federal workforce impacts our ability to properly1882mobilize for such a contingency, especially since we need a 2-year1883personnel ramp up to be in a position to be ready in time?1884    Mr. Berteau. Senator Hirono, I highlighted these issues in my1885opening statement and during the hearing, particularly in the exchange1886with Senator Kaine. DOD workforce planning for military personnel and1887Federal civilians must include consideration of the lead times needed1888for such personnel to be proficient in their positions. In addition,1889DOD must include such considerations in its contracting processes and1890funding. Contracts that cap future compensation at rates below the1891national economy make it hard for companies to compete for the workers1892needed.1893    Dr. Michienzi. DOD will need experienced people with expertise in1894multiple areas to prepare for defense mobilization. The current1895workforce cuts do not seem to be strategically planned to preserve that1896capability, while trying to achieve efficiencies. Developing a list of1897workforce skills necessary and matching it against requirements would1898make the effort more effective and still allow DOD to maintain the1899people necessary. In addition, preparing for defense mobilization1900requires a whole-of-government effort. For instance, the Department of1901Education to help with workforce training, the Department of1902Transportation to enable movements of people and equipment, the1903Department of Commerce and the U.S. Trade Representative to help1904balance trade and the flow of goods into and out of the U.S. while1905preserving U.S. capability. The same strategic planning should be done1906at these agencies to ensure the right skill sets and capabilities1907remain.1908            information technology and software mobilization1909    14. Senator Hirono. Dr. Michienzi, one of the biggest differences1910between the mobilization that occurred during World War II, which1911focused entirely on hardware like tanks, ships, and planes, and the1912present is the DOD's increasing reliance on IT and software to wage war1913effectively. From a supply chain perspective, what specific challenges1914and risks do you think our reliance on IT and software-based systems1915poses when it comes to planning and preparing for industrial1916mobilization, and what recommendations would you give DOD to address1917this important issue?1918    Dr. Michienzi. Unfortunately, much of the supply chain that1919supports IT products is global, and much of it lies in China and/or the1920Asia Pacific theater. For instance, although the U.S. still leads in1921the design of semiconductors, roughly 75 percent of semiconductor1922fabrication and 98 percent of the packaging of those semiconductors1923occurs in the in that theater. Taiwan accounts for about 60 percent,1924South Korea 13 percent, and China 12 percent. Compare that to the U.S.1925which only produces about 14 percent and produces NO state-of-the-art1926semiconductors, which are what are primarily used in IT products.1927Critical minerals, which are used in semiconductors and other IT sub-1928components are also primarily processed and made into finished goods1929such as IT systems in China. As we've seen with China's recent export1930controls, they can cutoff supply at any time, and this has already1931caused issues, with DOD scrambling to examine stockpiles and1932inventories and racing to expedite development of non-Chinese sources.1933Additionally, even if we are currently acquiring these things from1934allied nations such as South Korea, if a conflict should start between1935China and Taiwan, it will be difficult to ship anything from Asia-1936Pacific theater countries. Companies should have learned lessons about1937this during COVID-19, when supplies of critical items from some1938countries were scarce or non-existent. And some companies have begun1939looking at alternate or second source suppliers that are less risky.1940However, as long as industry is profit driven and the U.S. remains a1941free-market society, most of industry will use cheaper vs higher priced1942but more secure sources. This is where the U.S. should use industrial1943policy to combat this--something it is reluctant to do. Not using1944industrial policy solutions is an adequate strategy as long as there is1945a level playing field. But as we know, this is not, and has not been1946the case. Many countries--and especially our adversaries--do not play1947by the same rules:19481949    i. They provide subsidies to their industries, and many are state-1950owned;19511952    ii. They encourage over-production;19531954    iii. Which leads to dumping/flooding the market which drive prices1955down;19561957    iv. Which then drives out the competition, who cannot be cost-1958competitive;19591960    v. This captures market share--monopolizes markets;19611962    vi. They weaponize this advantage--as China has recently with1963gallium, germanium, graphite, and other critical minerals.19641965    China has used this to great effect to capture and dominate markets1966such as rare earths and lithium for EV batteries and is now attempting1967to do so for semiconductors. The CHIPS Act and the export controls1968Commerce has put in place for manufacturing equipment for advanced1969semiconductors are examples of where industrial policy is necessary and1970has slowed China down, but we will not be able to stop them. They are1971currently concentrating on legacy or trailing edge chips which dominate1972critical industries such as automotive, aircraft, appliances, cell1973phones, medical equipment, critical infrastructure, and DOD weapons1974systems, until such time as they can catch up on leading edge. Policies1975should be put in place to incentivize industry to use more secure1976sources, even if they are more costly. Those can be things like price1977preferences for using those suppliers.19781979    15. Senator Hirono. Dr. Michienzi, how should we think about1980mobilization differently today than in the past--for example, should we1981think about mobilization of different sectors of the economy, or should1982we think about mobilization on a different timeframe than in the past?1983    Dr. Michienzi. Mobilization will definitely be different today than1984it was in the past. I'm often asked, why can't we do things like we did1985it in the book ``Freedom's Forge'', and I have developed a `gap1986analysis that describes why we can't do that and how we should proceed1987now:1988    The Nation has an imperative to mobilize the Defense Industrial1989Base to address the increasingly aggressive threat from China and, to a1990lesser extent, Russa, Iran, and North Korea. As a reference point we1991can ask ourselves; ``Can we, at least in principle, do what we did in1992World War II, as described in the book Freedom's Forge?'' Here is a1993perspective on how we can accomplish similar objectives (i.e. large-1994scale mobilization of the Nation's industrial base to deliver1995affordable capacity for critical military capability) by addressing the1996conditions that are very different now relative to what was happening1997then.1998    Some key challenges we face today, relative to back then, are:19992000      The industrial ramp up started years before the U.S.2001entered WWII and was motivated by some key visionary leaders, including2002the President. We need to create that vision and have it embraced by2003POTUS with senior leadership assigned specifically to solve the2004challenges in a manner that Knudsen was empowered to do so.20052006      Time is of the essence and we are likely behind the2007curve. To achieve the necessary transformation, we must immediately2008start addressing inventory shortages for critical materials and2009components and build capacity in the industrial base to produce2010capability that goes well beyond what is currently available. Today's2011industrial base is not resilient as a result of right-sizing itself to2012the DOD ``peacetime'' demand. In other words, we must rebuild resilient2013surge capacity in our defense industrial base and supply chain.20142015      We must immediately address today's major workforce2016shortages across all industrial sectors by aggressively implementing a2017strategy to upskill the current population and investing in the next2018generation of workers across the spectrum of essential skills. Our much2019more complex systems today (e.g. precision guided munitions) versus in2020WWII (e.g. gravity bombs), along with an increase in automated2021manufacturing, will require leveraging and training a more highly2022skilled workforce.20232024      There were many large companies and factories that were2025not operating at capacity prior to WWII, so companies were eager to2026quickly repurpose that excess capacity for defense production. Today2027excess capacity is much scarcer, so we will have to immediately2028identify the capacity needs and aggressively build to fill the gaps.20292030      Our current supply chain is filled with single and sole2031source suppliers, many in adversarial countries, resulting in2032unacceptable lead times for some items and potential for supply chain2033disruption by unfriendly nation suppliers. Therefore, we must identify2034specific critical supply chain vulnerabilities then onshore or `ally2035shore' critical materials and components and develop multiple sources2036for critical elements of our supply chains.20372038      Many of the deals made back then were based on2039handshakes, where industry went out at risk, spending their own money2040until Federal funds were available. We must immediately address our2041contracting environment to dramatically minimize contracting times and2042develop an incentive structure that motivates industry to move out2043quickly (if necessary, even before a contract is definitized), allowing2044us to deliver systems aggressively while compressing schedule and2045maximizing throughput and efficiency.20462047      We must return to the paradigm that understands and2048accepts developmental risk then allows for failing early to accelerate2049learning and deliver capability much more rapidly.2050                         mobilization policies2051    16. Senator Hirono. Mr. Berteau, following the end of the cold war2052and subsequent peace dividend throughout the 1990's, a lot of the2053policies, processes, and organizations focused on mobilization2054atrophied or were put on the shelf. Based on your experience in the2055Reagan administration, what policies, processes, or organizations from2056the cold war would you suggest we go back and emulate or modify to2057consider implementing now?2058    Mr. Berteau. Senator Hirono, I noted in my opening remarks the2059following lessons from my cold war experience in the Reagan2060administration:20612062    1.  We need an operational plan and a scenario on which to2063calculate mobilization requirements, and from those requirements,2064propose and secure appropriations for needed funding. Requirements2065depend on a clear-eyed assessment of current and future adversary2066capabilities.20672068    2.  We need to demonstrate the capability to deploy forces to the2069theaters and to sustain those forces for a long time. This2070demonstration needs to be in the real world, not on paper or in plans2071alone. We did this with annual exercises in Europe that deployed2072thousands of personnel.20732074    3.  We need to build a collaborative partnership with industry, not2075an arms-length relationship. Industry needs to be part of the2076requirements assessment and part of the demonstration of capacity and2077capability.20782079    4.  We need to plan for, train and equip, and operate with allies2080and partners.20812082    5.  Mobilization planning includes more than DOD and the defense2083industry. It must involve all of government, the national economy, and2084the forces, industries, and economies of our allies and partners.20852086    17. Senator Hirono. Dr. McGinn, your report emphasizes the2087importance of creating mobilization scenarios and exercising them2088regularly--do you think DOD is doing enough in this area?2089    Dr. McGinn. DOD needs to rebuild its capacity to conduct2090mobilization planning and exercises. As I noted in my testimony,2091``Mobilization planning ended in the early 1990's. It is time to2092rebuild that capacity, not only in DOD, but also in the Federal2093Emergency Management Agency, the Department of Commerce, and the2094Executive Office of the President. These planning efforts will greatly2095improve mobilization efforts across agencies.'' \7\2096---------------------------------------------------------------------------2097    \7\ McGinn SASC Testimony.2098---------------------------------------------------------------------------2099                        interagency coordination2100    18. Senator Hirono. Dr. McGinn and Dr. Michienzi, your report also2101highlights the importance of interagency coordination in mobilization2102efforts, something former President Franklin Roosevelt addressed by2103appointing czars during World War II. What recommendations would you2104give the current administration to improve interagency coordination in2105support of mobilization?2106    Dr. McGinn. I believe that the administration could undertake a2107number of actions to improve interagency coordination in support of2108mobilization. I highlighted a number of specific recommendations in2109this area in my testimony:21102111      DPA Title I--Update executive orders and regulations. At2112the national level, the DPA is governed by a number of old and2113overlapping executive orders spanning numerous administrations that2114need to be refreshed and simplified. The Trump Administration should2115conduct a thorough review of relevant executive orders and regulations2116to better orient DPA policies and practices to address future national2117security challenges. \8\2118---------------------------------------------------------------------------2119    \8\ McGinn and Kaniewski, ``Where does the Defense Production Act2120Go from Here?''21212122      DPA Title VII--Relook the use of voluntary agreements and2123the National Defense Executive Reserve (NDER). Two sections of DPA2124Title VII have been scarcely used since the end of the cold war but2125present a tremendous opportunity for future industrial mobilization.2126Section 708 permits the government to establish voluntary agreements or2127plans of action with industry ``to help provide for the national2128defense.'' \9\ The Administration, for example, could establish2129voluntary agreements to prepare stand-by industrial capacity for2130potential surge use during conflict. Further, these agreements could2131enable dynamic government-industry collaboration on production issues2132such as that during WWII's War Production Board. Section 710 of Title2133VII also permits the President to establish a NDER, a volunteer group2134of industrial executives to support mobilization efforts. The2135Administration should examine the utility of this authority to form on-2136call groups of industry experts to serve in government during national2137emergencies. The Baroni team just completed a project addressing these2138two sections that can inform these efforts when published.2139---------------------------------------------------------------------------2140    \9\ 50 U.S.C. Sec. 4558(c)(1); Section 708(c)(1) of the DPA.2141---------------------------------------------------------------------------2142      Restarting mobilization planning efforts across the U.S.2143Government, as outlined in my response to the previous question.21442145    Dr. Michienzi. It will take a whole-of-government response to2146mobilize for a conflict. Currently, different government agencies have2147different, sometimes conflicting, requirements. An example is when a2148foreign government tries to purchase a U.S. company. The transaction is2149subject to review by the Committee on Foreign Investment in the United2150States (CFIUS), a multi-agency process where each agency reviews the2151transaction through their particular lenses. So, for example, while DOD2152could consider the transaction a national security risk, the Department2153of Commerce could look at it as creating jobs, which is good for the2154U.S. economy. This is a real-life example of where agencies are2155sometimes not aligned, and which could present large obstacles to an2156effort that requires them to be aligned. For industrial mobilization to2157be successful, direction will need to be provided from administration2158leadership to all agencies that there needs to be alignment to the2159goal, even when it may not align with the agencies' normal priorities.2160                 contingency contracting--all witnesses2161    19. Senator Hirono. Mr. Berteau, Dr. McGinn, Dr. Michienzi, are2162there lessons from our experiences in contingency contracting in Iraq,2163Afghanistan, and during the COVID-19 pandemic that we should also look2164at to consider emulating or modifying for use today?2165    Mr. Berteau. Senator Hirono, three big lessons from contingency2166contracting are:21672168    1.  Plan for contractor support in operational plans21692170    2.  Train with the contractors that will support deployments and2171operations21722173    3.  Have contracts in place and ensure funding is available.21742175    Dr. McGinn. Our experiences during the COVID-19 pandemic are2176particularly applicable today. The dramatic use of emergency Federal2177Acquisition Regulation (FAR) provisions, Other Transactions Authorities2178(OTs), and rapid procurement activities enabled the U.S. Government to2179meet the needs of this true national emergency through approximately2180$40 billion in contract obligations over 6 months. \10\ The increased2181use of OTs and rapid acquisition are excellent models for continuing2182use today.2183---------------------------------------------------------------------------2184    \10\ McGinn, Before the Balloon Goes Up: Mobilizing the Defense2185Industrial Base Now to Prepare for Future Conflict. The Greg and2186Camille Baroni Center for Government Contracting Report No. 10, October21873, 2024. Available at https://business.gmu.edu/news/2024-10/balloon-2188goes-mobilizing-defense-industrial-base-now-prepare-future-conflict2189(accessed March 4, 2025).2190---------------------------------------------------------------------------2191    Dr. Michienzi. Contingency contracting can be extremely helpful2192during crisis periods, as the defense industrial base does not2193routinely maintain excess production capacity, and it can take 6-242194months for capacity expansions to be completed. DOD has used this2195effectively many times. In addition, collaboration between government2196agencies can help provide more efficient contracting. During the COVID-219719 pandemic for instance, DOD played a vital role in the response from2198a health perspective. Congress provided funding to HHS and FEMA to help2199provide more medical resources--ventilators, masks, cotton swabs,2200syringes, etc. However, neither office had the necessary acquisition2201resources or training to execute that funding or use tools like the2202Defense Production Act (DPA), so DOD stepped in and helped them execute2203over $60 billion and helped expand production capability and prioritize2204orders using DPA. The same thing happened when Commerce received $522205billion in CHIPS Act funding. This was many times the annual budget for2206Commerce, and they didn't have sufficient acquisition workforce and2207knowhow (for instance, they only knew how to use FAR based contracts2208vs. other options such as Other Transaction Authorities (OTAs)) to2209execute, so DOD stepped in--helping train them how to do acquisition2210and sending personnel to help get them started while they staffed.2211                               __________2212            Questions Submitted by Senator Elizabeth Warren2213                         defense production act2214    20. Senator Warren. Mr. Berteau, Dr. McGinn, Dr. Michienzi, in your2215written testimony you said, ``mobilization is far more than a Defense2216Department undertaking.'' How does this apply in considering2217reauthorization of the Defense Production Act?2218    Mr. Berteau. Senator Warren, the Defense Production Act (DPA)2219provides authorities that have been delegated by the President to six2220Federal cabinet departments: the Departments of Agriculture, Commerce,2221Defense, Energy, Health and Human Services, and Transportation. In2222addition, section 722 of the DPA establishes the DPA Committee (DPAC)2223and provides that Committee membership includes the heads of 12 Federal2224departments and four Federal agencies as well as the Chair of the2225Council of Economic Advisors.2226    At the time that I was in charge of DPA for DOD, we held regular2227discussions with and coordinated closely with the other agencies (some2228more than others). Because of the paucity of separate legislation2229enacted in recent Congresses, the most recent DPA reauthorization was2230enacted in the Fiscal Year 2019 National Defense Authorization Act2231(P.L. 115-232). However, DPA reauthorization in the Senate is under the2232jurisdiction of the Senate Committee on Banking, Housing, and Urban2233Affairs, of which you are the Ranking Member.2234    I respectfully suggest that you encourage that Committee to2235examine, as part of its reauthorization, the integration of interagency2236interactions with regard to mobilization requirements, roles, and2237responsibilities across the interagency community.2238    Dr. Michienzi. Preparing for defense mobilization requires a whole-2239of-government effort. For instance, the Department of Education to help2240with workforce training, the Department of Transportation to enable2241movements of people and equipment, the Department of Commerce and the2242U.S. Trade Representative to help balance trade and the flow of goods2243into and out of the U.S. while preserving U.S. capability. Under the2244current Defense Production Act (DPA) authorization, multiple agencies2245have authority for Title I, which is used to prioritize government2246orders so they can be delivered on time if there are commercial orders2247that would delay the delivery. Title III, which is the investment part2248of DPA, is a unique defense authority and it should remain so. There2249are so many risks and issues within the defense industrial base, that2250diluting that authority risks reducing its effectiveness--just at a2251time when it is needed the most. Other agencies have investment2252authorities and funding which can be used to address their needs.22532254    21. Senator Warren. Dr. McGinn, do you believe that energy self-2255sufficiency enhances the Nation's national security?2256    Dr. McGinn. Absolutely. Energy self-sufficiency eliminates the risk2257of the dependence of foreign sources of energy that could be impacted2258by trade policy, conflict, or natural disaster.22592260    22. Senator Warren. Mr. Berteau, Dr. McGinn, and Dr. Michienzi, is2261Congress currently appropriating enough money to the DPA Fund to carry2262out Title III activities at the speed and scale necessary to respond to2263PRC economic warfare and mobilize in the event of a conflict?2264    Mr. Berteau. Senator Warren, there are not sufficient2265authorizations or appropriations for DPA Title III. In part, this is2266because DOD budget requests are based on DPA requirements that do not2267reflect the true readiness and mobilization needs of the Department.2268Congress, and this Committee, have the capability and, I believe, the2269affirmative responsibility to address that shortcoming, to direct the2270administration and DOD to determine those needs (and the basis for that2271determination) to provide that information to the Committee. I2272recommend that the Committee not wait until the final enactment of the2273Fiscal Year 2026 NDAA to provide such direction to DOD but instead, as2274I stated in my testimony, to direct DOD to conduct a full-blown2275exercise to determine what mobilization requirements are and to2276describe the scenarios on which those requirements are based. I2277recommend the Committee direct receipt of the results between now and2278the time the Senate and the House of Representatives finalize the2279Fiscal Year 2026 NDAA.2280    Dr. McGinn. Congress has dramatically increased appropriations to2281the DPA Fund since the COVID-19 pandemic. Many of these appropriations2282have focused on countering Chinese industrial policy efforts to gain2283dominant market positions in areas such as rare earth minerals,2284batteries, and specialty chemicals. Congress could appropriate more2285funds for these and other efforts.2286    Congressional support for mobilization would be welcome on a number2287of fronts, including appropriated funds in the DPA Fund. Title III2288activities will help increase domestic industrial capacity in key2289sectors that support U.S. military capability development.2290    Dr. Michienzi. No. Defense industrial base issues are immense.2291Decades of supply chain globalization and diminishing U.S. capability2292have made this country vulnerable if conflict should arise. Take the2293example of China restricting the exports of certain critical minerals.2294The PRC controls 80 percent of the processing of critical minerals, and2295they understand completely where the U.S. uses these materials--2296including our most critical weapons systems, satellites, and2297communications equipment. They have restricted a handful of materials2298so far, and those restrictions have been targeted to maximize pain for2299U.S. industry--both commercial and defense. But there are many more2300they control and could weaponize if a conflict occurs. DOD funded 8$7002301million over the past 4 years in this sector--a large portion of the2302Title III budget--but this is not nearly sufficient to completely2303mitigate the issues. And there are many other industrial base2304problems--shipbuilding, castings and forgings, microelectronics,2305missiles and munitions, etc. Title III is the most efficient and2306effective way to address these issues. Nowhere else in DOD is2307positioned to look across all portfolios to see cross-cutting issues2308and address them in a holistic manner. More funding would allow it to2309be used for strategic portfolio and sector investments (similar to what2310is being done with critical minerals) vs. having a more `whack-a-mole'2311approach driven by insufficient funding.2312                          defense competition2313    23. Senator Warren. Dr. McGinn and Dr. Michienzi, what are the2314cost, schedule, or readiness benefits of prioritizing an open systems2315approach?2316    Dr. McGinn. Prioritizing open systems approaches help DOD to foster2317competition and refresh technology throughout the life of a program.2318Increased competition helps lower overall costs and prevents vendor2319lock-in to proprietary solutions.2320    Dr. Michienzi. Open systems approaches are the most cost effective2321and efficient way for DOD to acquire and sustain its systems and its2322ability to adopt innovation and new capabilities. Currently most DOD2323systems are provided by a sole supplier (vendor lock) who owns all the2324technical data, thereby reducing competition which leads to higher2325pricing and lack of technology development. Having an open system,2326along with the technical data, allows DOD to compete production2327contracts for systems to get better pricing and potentially better2328technology. It also allows DOD to upgrade systems to provide increased2329performance and readiness, and to mitigate obsolescence issues--2330something that constantly plagues the department.23312332    24. Senator Warren. Dr. McGinn and Dr. Michienzi, do you have any2333quantitative analysis or examples that show the cost, schedule, or2334readiness benefits of prioritizing an open systems approach?2335    Dr. McGinn. One example where an open systems approach has shown2336benefits is the Army's Joint Light Tactical Vehicle (JLTV) program.2337During the 2022-2023 recompete for JLTV, AM General defeated the2338incumbent Oshkosh Defense. This was very surprising given the history2339of long-running franchise programs over the past several decades. The2340Army's open systems approach to JLTV enabled an effective competition2341during the recompete. While the Army leadership just canceled JLTV, the2342competition showed the value of an open systems approach.2343    Dr. Michienzi. Although I don't have quantitative analysis, the2344Sentinel program was one of the first Major Defense Acquisition2345Programs (MDAPs) to use digital engineering and open architecture. I2346know that it has saved the Air Force money, even before the system is2347fielded, and allowed them to keep competitive pressure on industry. I'm2348sure you can get data from the Air Force.23492350    25. Senator Warren. Dr. McGinn and Dr. Michienzi, do you have any2351quantitative analysis or examples that show the cost, schedule, or2352readiness harms of failing to prioritize an open systems approach?2353    Dr. McGinn. The F-35 fighter aircraft program is an example of2354this. Like many systems at the time, DOD did not prioritize an open2355systems approach when it competed the F-35 program. This resulted in a2356largely closed proprietary system that limited DOD's flexibility and2357created a reliance on a single vendor for updates and support.2358    Dr. Michienzi. From my time working for a Navy Program Office,2359there was an example where the prime contractor was charging 18 percent2360markup on the rocket motors and another 18 percent to manage the rocket2361motor supplier for a key missile system. Had they had an open systems2362approach and the technical data, they could have looked at other2363options for the rocket motors to avoid that high cost.23642365    26. Senator Warren. Mr. Berteauand Dr. Michienzi, you previously2366testified that many governmentwide acquisition contracts ``limit the2367number of companies eligible to receive awards and offer few2368opportunities for new companies to gain a spot.'' What tools would you2369recommend DOD use to increase competition?2370    Mr. Berteau. Senator Warren, although agency heads and many of2371their personnel focus on reports regarding the breadth and depth of2372competition in Federal contracts, it is vital to recognize that2373competition is not an end in itself. Competition is a tool that,2374properly pursued, enables Federal agencies to achieve its needed2375results and outcomes more effectively and efficiently through2376contracts. Adequate competition also helps ensure that the government2377pays a fair price for contract results, and competition can spur2378innovation. Finally, a competitive business environment can provide2379surge capacity in time of war or emergency.2380    The testimony you reference in your question was my statement for2381the record for the April 26, 2022, hearing before the Senate Armed2382Services Committee on the health of the defense industrial base.2383Specifically, I wrote that ``DoD contracts are often awarded to2384companies eligible under a set of contracts known as GWACs, or2385governmentwide acquisition contracts. Many of these contracts limit the2386number of companies eligible to receive awards and offer few2387opportunities for new companies to gain a spot on any given GWAC. This2388makes the job of the contracting officer easier but does little to2389increase the number of bidders.''2390    GWACs award contracts to a limited number of companies, then2391compete task orders only among those firms on the GWAC schedule. Under2392both the Trump and Biden administrations, the implementation of an2393approach to contracting called ``category management'' meant that some2394agencies shifted contract work to a GWAC on which incumbent companies2395were not eligible to bid for task orders and for which no opportunity2396existed for those incumbent companies to become eligible on that GWAC2397(through a process referred to as an ``on-ramp''). When interested,2398capable companies are unable to bid on a contract, competition is2399reduced.2400    Some ways to offset that reduction in competition is for the2401Federal Government to:24022403    a)  Include more companies on GWAC schedules24042405    b)  Increase the frequency of on-ramp opportunities24062407    c)  Avoid shifting ongoing contract work to other GWACs on which2408incumbent contractors are ineligible to bid.24092410    The Trump administration is currently assessing consolidating under2411the General Services Administration GWACs for ``common products and2412services'' and for information technology contracts. Agency proposals2413and comments are due to GSA by May 19, 2025. This Committee could2414benefit from directing GSA to provide their plan for such2415consolidation, particularly with regard to DOD.2416    Dr. Michienzi. Requiring programs to carry multiple contractors for2417integration, but for also critical sub-systems until Milestone B. It2418will cost more up front but will reduce risk and save the program money2419overall because competition will drive costs down and ensure DOD is2420getting the best technology, while providing alternatives should an2421issue arise during development.2422                         acquisition workforce2423    27. Senator Warren. Mr. Berteau, how does a well-qualified2424acquisition workforce benefit the industry and the Department of2425Defense?2426    Mr. Berteau. Senator Warren, the defense industry and all Federal2427Government contractors depend on a competent, capable, and fully2428staffed acquisition workforce. This workforce includes contracting2429officers, program managers, and those who develop requirements and help2430determine what to buy as well as how to buy it. Actions that undermine2431such a workforce are detrimental to regular operations as well as2432planning for mobilization.24332434    28. Senator Warren. Mr. Berteau, do you have any examples of how a2435program was less costly or faster because it was managed by an2436acquisition official who was an acquisition expert?2437    Mr. Berteau. Senator Warren, one of the challenges of the Federal2438procurement process is the focus on problems to the exclusion of2439documenting success stories. In my experience, there is a strong2440correlation between acquisition expertise and successful outcomes, but2441there are many other factors that have equal or greater impact on2442success, including program management, adequate and stable funding,2443consistent requirements, and support from the chain of command and the2444Congress. There are no studies of which I am aware that would prove a2445cause-and-effect relationship between acquisition expertise and program2446success in meeting cost, schedule, and performance goals.24472448    29. Senator Warren. Mr. Berteau, how long does it take for someone2449to become an acquisition expert?2450    Mr. Berteau. Senator Warren, I am unaware of any analysis that can2451answer this question, but in my experience there is wide variation in2452the range of time it takes to become an expert.24532454    30. Senator Warren. Mr. Berteau, does DOD have the acquisition2455workforce it needs to manage DOD contracts, and if not, what resources2456or training does the workforce need?2457    Mr. Berteau. Senator Warren, the data reported by Federal agencies2458show that DOD has a smaller percentage of vacancies in the contracting2459officer workforce than many other agencies. It is likely that recent2460actions such as the Deferred Resignation Program, termination of2461probationary employees, retirements under VERA and VSIP, and2462Reductions-in-Force actions will increase the number of vacancies in2463the DOD acquisition workforce. I suggest that this Committee request2464up-to-date information from DOD.24652466    31. Senator Warren. Mr. Berteau, would the Department of Government2467Efficiency's significant layoffs or resignations of DOD's acquisition2468workforce hinder DOD's ability to keep programs on schedule?2469    Mr. Berteau. Senator Warren, layoffs, resignations, and retirements2470will hinder DOD's ability to award and administer its contracts and2471will impact program success.2472    Dr. Michienzi. DOD will needs experienced people with expertise in2473multiple areas, including acquisition. The current workforce cuts do2474not seem to be strategically planned to preserve that capability, while2475trying to achieve efficiencies. Developing a list of workforce skills2476necessary and matching it against requirements would make the effort2477more effective and still allow DOD to maintain the people necessary to2478keep programs on schedule, as well as make them efficient and cost-2479effective.24802481    32. Senator Warren. Mr. Berteau, would the Department of Government2482Efficiency's significant layoffs or resignations of DOD's acquisition2483workforce hinder DOD's ability to manage programs efficiently and cost-2484effectively?2485    Mr. Berteau. Senator Warren, layoffs, resignations, and retirements2486will hinder DOD's ability to manage programs efficiently and cost-2487effectively.2488    Dr. Michienzi. DOD will needs experienced people with expertise in2489multiple areas, including acquisition. The current workforce cuts do2490not seem to be strategically planned to preserve that capability, while2491trying to achieve efficiencies. Developing a list of workforce skills2492necessary and matching it against requirements would make the effort2493more effective and still allow DOD to maintain the people necessary to2494keep programs on schedule, as well as make them efficient and cost-2495effective.24962497                                 [all]