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3 STRATEGY AND ORGANIZATION Although DOD has never developed an explicit peacetime strategic manufacturing plan, its implicit strategy has been consistently to neglect manufacturing equipment and process technology. This neglect has: 0 forced important manufacturing capabilities to leave the United States almost entirely, caused weapon systems to increase in price while similar commercial products have decreased in price, and allowed the defense industrial base to erode. WHAT A MANUFACTURING STRATEGY ENTAILS We are calling, therefore, for the formulation of an explicit manufacturing strategy for DOD. The strategy should acknowledge DOD's pivotal role in the health of the manufacturing base, take advantage of DOD's commanding share of total U.S. expenditures on durable goods, convey to defense contractors the importance of manufacturing technology to DOD, and remove some of the costly uncer- tainty facing defense contractors. The strategy must encompass not only the prime contractors and internal DOD organization, but also the myriad suppliers and vendors to the prime contractors. Among the questions that the strategy should address are: 1. How much of the defense budget should be devoted to ensuring the availability of enabling process technologies on a timely basis? 2. Which process technologies will be critical to cost-effectively producing the next generation of weapons? 17

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~8 3. Which process technologies are in danger of losing needed domestic sources? The Secretary of Defense should require the development of a strategy that addresses these issues. The actual formulation of the strategy probably needs to be done by the Secretaries of the Army, Navy, Air Force, and Defense, or by their Under Secretaries, to encompass the issues with sufficient breadth and authority. The officials responsible for formulating the strategy need not have detailed knowledge of manufacturing processes. Rather, they need to know what industries, materials, weapon systems, and performance requirements will be critical to DOD in the next S to 10 years. Technical advisers can provide the bridge between those factors and manufacturing. The senior officials, however, should establish the priorities. Once the strategy identifies the technologies that are essential for future weapon systems, the ManTech program managers, in concert with other experts including contractors, can develop approaches for addressing the advances needed in manufacturing technology. The program budget can then reflect clearly the effort needed to achieve progress in each area. Broad procurement issues that affect the development and use of manufacturing technology should also be part of the strategy. Examples include treatment of overhead rates and strategies to consider manufacturability early in the design process. More specific procurement issues are also important. For example, the current time lag between the idea for a project and its funding--often 2 to 3 years--is far too great. DOD could benefit from tailoring specific contracting procedures for investment in innovative but risky process technologies, so that the investment is made in a timely manner. ORGANIZATIONAL RELATIONSHIPS In the past, the services have created essentially separate ManTech programs. The ManTech office at the Air Force Materials Laboratory has provided centralized control, redirected resources when needed, coordinated related projects, and defined future needs. It identifies the projects for which contractors compete. In contrast, the Army did not develop projects internally. It relied on proposals from contractors for specific ManTech

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19 projects. Also, the Army program was dispersed throughout many major subordinate commands, each of which received funding based on historical levels rather than future needs. Similarly, until recently, the Navy program was dispersed among commands and laboratories and still has a small, relatively weak, non-technical central office. These varied experiences provide characteristics to emulate as well as some to avoid. Management structure and responsibilities should reflect the following principles: communication among the Office of the Secretary of Defense (OSD) and the services in defining priorities so that projects respond to defense needs; some centralized control in OSD to coordinate the services in a unified program; since the services can best identify manufacturing improvements to support mission objectives and are more closely involved in defining product requirements, they retain control of project definition and management; centralized control of the program within each service to provide unity and strong program management direction; in consonance with the Packard Commission's recommendations for decentralized management, 2 the military services define and manage individual ManTech projects; and the services work with contractors and vendors, particularly in designing projects, to determine the state of the art and future needs; projects should reflect not only the priorities but also the contractors' economic and technological needs and capabilities. The specific application of these principles in an actual program is the responsibility of the Secretary of Defense. One reasonable approach to ManTech program management would include the following: The Secretary of Defense establishes a central manufacturing policy office in OSD, at a level high enough to have the ability and authority to provide substantive direction to the services and to control budget resources. The OSD policy office and the services expand on the strategic priorities by developing broad, cohesive technical approaches to achieve the established goals. The OSD policy office assesses the effectiveness of the overall program but not of individual projects.

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20 The office develops a "benchmarking" system to monitor available and developing process technologies here and abroad in areas important to weapon systems. The assessment ensures that proposed projects are in concert with defense priorities and the objectives laid out in Chapter 4. Each service establishes a central program office for project management. To provide a high level of manufacturing expertise and information on the capability and needs of defense contractors, OSD establishes a civilian advisory function. AN EXAMPLE As a specific example of the process we recommend, consider a program to explore the use of composite materials for aircraft. OSD and the services identify composites as having high strength-to-weight ratios, eluding detection by radar, and being noncorrosive, traits that are needed in a variety of future weapon systems. Working with contractors, ManTech program managers determine that producing complex, large, or numerous composite structures is either impossible with current technology or extremely expensive. Specific technological objectives are defined. The needs are further clarified in terms such as "reduce rejects by 50 percent on all composite structures" and "determine nonautoclave methods for curing large composite structures." The ManTech program, in response, focuses a mayor portion of its funding on meeting these production specifications for composites. Individual services then take the lead on specific problem areas. For example, the Air Force might focus on small complex structures, the Navy on large structures and the Army on high-volume production. Projects would be designed to meet the specific technological objectives that, as a group, will help meet a strategic goal. Other DOD initiatives could then be used to ensure that success ful projects are incorporated into production of the next generation of weapon systems. CONCLUSION A manufacturing strategy needs to be set by the Secretary of Defense. Direct funding of manufacturing

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21 :echnology development will be one part of such a Strategy. Priorities established by the Secretary of Defense for the ManTech program will enable ManTech Program managers to support the development of process technologies to produce future weapon systems. In this say, the HanTech program can play a major role in Lmproving the manufacturing capabilities of the defense Lndustrial base. NOTES L. The Statement of Principles for Department of Defense Manufacturing Technology Program, dated March 14, 1980, provides guidance that the services follow to varying degrees. In the matter of centralization, for example, the principle is that n [eJach Service will provide strong central program management . . . ." We agree with this principle but find that the Air Force was most successful in fulfilling it. ,. Interim Report to the President by the President's Blue Ribbon Commission on Defense Management, 1986.