Terry Gerton So we're going to dig into DoD's foreign supplier dependencies. Tell me, why did GAO decide to tackle this topic?
Bill Russell Well, this is something that has come up over the years, most recently in the 2024 National Defense Industrial Strategy highlighted the importance of really knowing where your supply chain, the suppliers, key parts and things that you need for your systems come from, domestic and foreign, and highlighted the challenges with foreign dependency in particular. As we just saw at the end of 2024, China restricted exports of key critical materials like gallium, germanium, that are important not just for DoD systems but electronics in general. So having a sense of where you're dependent on a foreign supplier and then thinking of ways to mitigate some of those risks is important.
Terry Gerton Well, the report seems to say that DoD doesn't really have the visibility that it needs. Why is that such a critical vulnerability, especially kind of at lower levels of the supply chain?
Bill Russell Sure. So there are existing data systems like the Federal Procurement Data System that have lots of data about who the prime contractors are for various weapon systems and other aspects of the things that DoD buys. And that's pretty reliable. And then you have the next tier down of, if you think about a missile system or an aircraft of some sort, there are major subsystems like the engine or the radar package, big pieces that make up that system's functionality. And DoD has gotten better at understanding what the source of manufacturing, the country of origin for those types of systems, where they're coming from. But then you go one level down, and now you're talking about the little component that goes on the microchip, the individual part for a particular system, the raw materials needed. And that's where there are a plethora of suppliers across the global supply chain that are feeding into DoD and other systems. So that's where it's hard to tell sometimes where those parts are being manufactured and how it links up ultimately to a DoD weapon system. And so that's where some of the efforts have been in the department to try to improve what they know about those types of systems and where there might be risk and then ultimately mitigating them if need be.
Terry Gerton Tell us a little bit more about the specific risks in terms of supply chain disruption or adversarial impact. When you don't know who's providing you the nuts and bolts, so to speak, of these systems, what risk does that introduce?
Bill Russell Sure. In particular, there could be, if someone turns off that supply chain, like we saw with the China example, that's critical material that's not making it to your systems in the quantities and the speed that you had hoped for. There are also security risks. There's something in the realm of cyber or some other manipulation of the system that could impact the performance over time. And then there are just traditional supply chain risks. So, what if there's only one supplier, they're in one country, you didn't know that, and then they go out of business or they get bought or limit their production in a way. You want to know those things so that you can course correct as needed.
Terry Gerton What does DoD currently have in the pipeline that is designed to help address some of this lack of visibility?
Bill Russell The two key efforts have been underway over the last few years. One has been focused largely on the F-35 program, which impacts multiple military departments and lots of international partners are using that system, really trying to understand the major subsystems and components. So that would be the things like we talked about, the radar systems, the engines, where the microelectronics are coming from. And so they've made a lot of effort and had some success in mapping out about three-quarters of the parts involved in key elements like the propulsion system. Where the challenge comes is getting down to that next level. For individual parts, sub-equipment, raw materials, that part, there's still not a lot of visibility, and that's where the challenge comes. The second effort is led by the Office of Secretary of Defense, the Acquisitions and Sustainment Undersecretary, and it's really looking at a much broader suite of systems, over a hundred weapon systems, and it's just really trying to get to that first and second tier of supplier and map what is known. And so that's harvesting a lot of information that's already available in the department and kind of putting it together in one place.
Terry Gerton I'm speaking with Bill Russell. He's a Director for Contracting and National Security Acquisitions at the Government Accountability Office. So as you dug down into this and you looked at what DoD was doing and how effective it was, you came up with three recommendations. Tell us what those are.
Bill Russell Yeah, absolutely. So a lot of these are to amplify some of the progress that the department is making. One, it has stood up an office intended to integrate all of this supply chain data across DoD and sort of pivot from reacting to problems to proactively finding issues that might be there and mitigating those before there's a consequence. And so we just recommended, they still haven't quite identified the resources that are going to be needed to carry that out, the priority supply change that they might want to address first, and then some of the timeframes to implement those efforts. That was one. The second had to do with a Defense Business Board report also pointed out some supply chain illumination best practices that come from the commercial sector. And we thought it was prudent for DoD to identify an organization that would be responsible for implementing those types of recommendations. And last and probably most important, one of the challenges and why there isn't better data on the supply chain, is a lot of the requirement to get that information is not in the contracts with the vendors. So we recommended that the department pilot or some other way test what it would take, how much does it cost, to get some of the vendors to provide that information. We heard a spectrum of issues. Some folks thought that it was readily available, it was just a matter of asking for it and maybe paying some for it. Others thought that it would involve proprietary information and intellectual property and it would be very difficult to get that information from suppliers. And so we just landed on, hey, go try it. Pilot it. It's something that others have recommended, but until you go and maybe pick a supply chain and try to see what happens when you try to implement these clauses, you're not going to know. But it could be a key factor in resolving a number of these issues.
Terry Gerton Well, DoD has certainly been talking a lot about acquisition reform. How did they receive your findings and recommendations?
Bill Russell They concurred with all three of the recommendations that I mentioned, and they do have efforts underway already. I think they recognize the importance of these challenges and looking to try to resolve some of these issues and be more proactive where they can be.
Terry Gerton Is there a lead organization at DoD that's tasked with implementing some of these recommendations?
Bill Russell Most of them reside with the Office of Acquisition and Sustainment, the undersecretary level. There's an Office of Industrial Base Policy, some other groups that will probably lead the charge in addressing them.
Terry Gerton Have they offered a timeline?
Bill Russell Not yet. They agreed to do it, and then we'll continue to follow up with them as we do with other reports on the implementation going forward.
Terry Gerton So finally, it just occurs to me that DOD supply chain management has been on GAO's high-risk list for decades, probably, I think. How does this particular finding fit into the broader context of their structural issues with supply chain managements, and if they fix this problem, will it make meaningful progress in getting them off the list?
Bill Russell It will absolutely help in getting at some of the issues that we have on the high-risk list. Certainly, being able to effectively identify where the bottlenecks are in the supply chain or the security challenges, what have you, is the first step. And then what we highlighted on the high-risk list and other places is then the need to effectively mitigate those challenges. And they have a number of tools that they can use depending on the situation. So it's just putting all of those pieces together. But certainly, addressing the recommendations we have in this report will help overall in that high-risk area.