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Executive Summary

INTEGRATION OF COMMERCIAL AND MILITARY MANUFACTURING

More Than Just Commercial Off-the-Shelf

The integration of commercial and military manufacturing (ICMM) has been a subject of extensive debate and steadily increasing policy implementation in recent years. This integration can be defined as optimal use of the commercial manufacturing base to meet defense needs over the life cycle of a system. It encompasses a range of approaches, with commercial off-the-shelf (COTS) items at one extreme and products and processes unique to defense applications on the other. The intermediate approaches (shaded areas in Figure ES-1) are more complex, where defense needs are met with enhanced commercial products or by military products built in commercial or dual-use facilities.

The framework of Table ES-1 applies at the system, subsystem or assembly, and component levels. Commercial suppliers are willing to sell COTS products to the Depatrtment of Defense (DOD) using commercial practices supported by current policies. At the component level (particularly for electronics), defense contractors are increasingly using commercial components. Assemblies and sub-systems, however, are predominantly built on military-unique production lines. The opportunity for 2010 and beyond lies in increasing the use of the commercial production base at the assembly and subsystem levels. These opportunities exist across mechanical, optical, and electronic subsystems.



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Page 1 Executive Summary INTEGRATION OF COMMERCIAL AND MILITARY MANUFACTURING More Than Just Commercial Off-the-Shelf The integration of commercial and military manufacturing (ICMM) has been a subject of extensive debate and steadily increasing policy implementation in recent years. This integration can be defined as optimal use of the commercial manufacturing base to meet defense needs over the life cycle of a system. It encompasses a range of approaches, with commercial off-the-shelf (COTS) items at one extreme and products and processes unique to defense applications on the other. The intermediate approaches (shaded areas in Figure ES-1) are more complex, where defense needs are met with enhanced commercial products or by military products built in commercial or dual-use facilities. The framework of Table ES-1 applies at the system, subsystem or assembly, and component levels. Commercial suppliers are willing to sell COTS products to the Depatrtment of Defense (DOD) using commercial practices supported by current policies. At the component level (particularly for electronics), defense contractors are increasingly using commercial components. Assemblies and sub-systems, however, are predominantly built on military-unique production lines. The opportunity for 2010 and beyond lies in increasing the use of the commercial production base at the assembly and subsystem levels. These opportunities exist across mechanical, optical, and electronic subsystems.

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Page 2 ~ enlarge ~ FIGURE ES-1 Commercial-military integration framework. A Compelling Military Need The expected nature of combat in 2010 is driving DOD to a substantial transformation of its force structure. The new force will be more flexible, able to respond more rapidly, and better equipped to deal with an unpredictable threat. The transformation strategy implicitly relies on the rapid introduction of new technology and rapid industrial response for the replenishment of weapons, spare parts, and other consumables essential to readiness and sustainability. The fact that potential adversaries have easy access to commercial technology will compel DOD and defense contractors to excel at being the first to integrate militarily relevant commercial technology into defense systems. An effective and robust integration of commercial and military manufacturing can improve military acquisition capabilities and capacity dramatically. It is needed in both long-cycle processes—those that produce technological marvels whose need and costs have to be predicted 15–20 years in advance—and processes that respond rapidly to changing threats and make the latest technology available to the warfighter at substantially lower unit and life-cycle costs. Opportunities Abound This study reviewed several dozen examples of successful integration of commercial and military manufacturing, ranging from pilot projects to sustained initiatives across many types of products. A few salient examples are shown in Table ES-1. Military and commercial and dual-use manufacturers have demonstrated the ability to work together in many different ways using many business models. In almost all of these examples, however, an individual on the govern

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Page 3 TABLE ES-1 Examples of Successes in ICMM Project Results DARPA/USAF miniature air-launched decoy (MALD) Pushed the envelope to demonstrate that a high-performance, military-unique system could be developed from commercial sources Motorola Communications Systems Division—JSTARS common ground station Subcontracted 80% of circuit board production to commercial sources and realized higher quality and lower costs Litton Amecom—NASA satellite control system Used commercial standards, parts, and design practices to achieve cost reductions of 20–50% USAF ManTech/TRW Military Parts from Commercial Lines Pilot Program Demonstrated that electronic modules for the F-16 and RAH-66 could be redesigned for commercial manufacture and produced on a high-volume commercial line, with savings of 30–50% in cost and 90% in time from design release to production USAF Electronic Systems Command-North—warning system unattended radar (AN/FPS-24) Signal processor (ground environment) used commercial plastic encapsulated microcircuits to reduce costs by 85% and increase reliability (more than 6 million hours without failure) USAF ManTech C-17 horizontal stabilizer outer torque box Combined military and commercial production and achieved a 50% cost avoidance M/A-COM Northrop Grumman ALQ-135 EW System Commercial redesign for technology insertion reduced costs by 52% ment side, and often one on the contractor side, had to make heroic efforts to use existing law and policy creatively to overcome barriers in common practice and culture. These barriers include the following: The lack of a commercial knowledge base and the need for an acquisition workforce (including contracting officers) familiar with commercial practice; Government acquisition provisions that commercial suppliers are unwilling to accept, including cost accounting, auditing, specialized specs and standards, procurement laws and socioeconomic provisions, intellectual property rights provisions, and logistics practices; Acquisition and upgrade cycle times that are drastically misaligned with commercial cycles, including lengthy test and evaluation and requalification requirements;

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Page 4 Profit policies that discourage defense prime contractors from commercial outsourcing and push make/buy decisions toward "make"; and Lack of institutionalized solutions that program managers can routinely use. In addition to the encouragement provided by previous successes, several trends will increase the opportunities for integration of commercial and military manufacturing over the coming decade: The emergence of a new $70 billion industry sector devoted to flexible electronics manufacturing services with capabilities suited to small-lot custom manufacturing for defense applications involving digital, analog, and microelectromechanical subsystems (MEMS); Advances in precision automated manufacturing for small lots, with greatly improved flexibility to accommodate on-demand manufacturing of defense items; Availability of technology for automated design, production, and in-line inspection and testing that, by 2010, will offer to electromechanical and MEMS devices a level of manufacturing flexibility and integration comparable to the production infrastructure for today's chips and boards; Commercial upgrades to aging avionics, a major opportunity for ICMM because upgrading using mil-spec configurations is usually unaffordable and often impossible; and Advances in the ability to share digital product data and business data in supply chains, with new efficiencies in rapid response manufacturing of the type needed by DOD. RECOMMENDATIONS Recommendations That Would Motivate Change Vigorously pursue policy, incentives, and implementing guidelines for ICMM. Such policies would create metrics and incentives for ICMM and remove barriers. An example of an appropriate metric would be to assess commercial content based on bills of material. Some potential incentives include the following: -Using source selection factors to assess trade-offs between commercial and military manufacturing, -Instituting profit policies to make defense contractor use of commercial production a profitable and viable business decision, and -Sharing any savings attributable to ICMM.

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Page 5 Contract for life-cycle support and technology refreshment. Long-term contracts will create incentives for contractors to reduce costs, increase availability, and keep up with technology. Recommendations That Would Enable Change Establish a commercial acquisition academy to augment training and education. The academy would have a research component to develop best practices and case studies as well as a training component to incorporate commercial practices into military acquisition training and processes. Fund and execute additional rapid-response demonstration programs to build a broad base of experience with ICMM. One obvious mechanism for this is the DOD ManTech program. Such demonstration programs could be an integral part of research programs in a commercial acquisition academy. Increase DOD and defense sector awareness of planned and emerging commercial technologies and capabilities. Market awareness is critical and can be easier for the military as a unique customer than for commercial competitors. Invest in research and development to increase the compatibility of military operating environments and commercially produced components.