The U.S. Machine Tool Industry and the Defense Industrial Base (1983) / Chapter Skim
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3 The Department of Defense, Prime Contractors, and the Machine Tool Industry: Relationships That Affect Industry Structure
3 The Department of Defense, Prime Contractors, and the Machine Tool Industry: Relationships That Affect Industry Structure
Pages 52-83
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From page 52... ...
Indeed, the ma jot forces for changing the industry are not defense~oriented. Nevertheless, the Committee believes that the Defense Department' s direct and indirect influence on the indus~ery can be substantial Although DOD direct purchases of machine tools are small compared with total domestic machine tool production, DOD' ~ influence on industry behavior manifests itself indirectly, through the requirements placed on pr ime contractors .
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From page 53... ...
DRI concludes that Baby conservative estimate, up to 20 percent of the aggregate domestic consumption of machine tools is related to defense needs even in peacetime..
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From page 54... ...
54 TABLE 12: Domest ic Consumption of Mach ine Tool s ~ ~ , D 0` ~ _.
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From page 55... ...
An important caveat is that none of the estimates takes into account the broader range of manufacturing equipment and systems, including related software, that should be considered along with the traditional categories of metal-cutting and metal-forming machine tools in assessing either DOD needs or the competitive status o f the domestic industry. It is reasonable to conclude, however, that the defense sector remains an important market for these products and services and as such represents a far from negligible influence on the development of the domestic machine tool industry broadly defined.
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From page 56... ...
Further, there is little contractor incentive to lower costs through new more efficient machine tools when contracts are negotiated on a Cost plus" or other similar basis (i.e., where profits are based primarily on costs)
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From page 57... ...
Industrial Productivity Improvement Air Force ManTech TechMod N avy ManTech Tedded ( included in ManTec h f unding) EY84 93 $S0a/ lDl 61.8 66.4 34.0 38.0 37.3 49.8 6.0 6.D a/ A House Appropriations subcommittee first rejected the Army's FY 1983 request for ManTech, then added SSO million but under R&D rather than procurement programs.
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From page 58... ...
Very few awards have been made directly to machine tool companies. ManTech funds have gravitated to prime contractors for the following reasons: Increasingly ~ WD policy has placed a premium on the implementation of validated technologies .
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From page 59... ...
For example, a current Department of the Army project to disseminate EMS technology has recently resulted in th e completion of a large study detailing the economic and technological potential of flexible manufactur ing systems. This pro ject, which is des igned to overcome a perceived lack of information among machine tool users about the potential of EMS technology, is being carried out through a consortium that included: Or 1 Ah i tool builders.
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From page 60... ...
Air Force Machining P~der metallurgy Colitis production Electronics packaging E lexibl. au~ted batch ~nufactur ins Critical arteriole SCAM arch itecture/appI icat ion s Repair op rations Electronic poor device r Never Aircraf t and related systems Air f rem amiably automation Materials technology for propulsion Av ion ice, the and eveluat ion Ships, shipbuilding and related ·yste - : Shiptuildinq automation Large combat cysts structures (..
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From page 61... ...
TechMod/IPI funds the validation of advanced manufacturing technologies in return for a contractor's commitment to make ~ignif icant capital investments in modernization of equipment producing a particular weapons system in a particular facility. Although its purpose is ordinarily to r educe costs, i t may also, be used to incr ease surge capac ity or improve product quality and performance .
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From page 62... ...
The general aim of these and other measures utilized under Me aegis of TechMod/IPI is to provide incentives for contractor investments through greatly increased returns on investments and by indemnification of investments in the event of cancellation of the procurement programs for which ache investments are made. Government and industry contract specialists have faced several problems that have precluded greater use of these concepts.
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From page 63... ...
A 1980 report of the Air Force Systems Command suggested that n if technology modernization can work fo r aerospace, it can work for other critical civil/military industries, such as electronics, machine tools, and basic materials. n5 A TechMOd program for equipment vendors conceivably could be carried out through prime contractors or directly in connection with DOD procurement.
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From page 64... ...
Indeed, the pr ime contractors were viewed by respondents as useful in shielding machine tool companies from the problems of d tract government negotiations. Dea 1 ing Wi th the Gove rnmen While not every machine tool company interviewed had concerns about direct government business, a substantial number agreed on the types of administrative procedures in technical specification that tend to discourage machine tool builders.
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From page 65... ...
Sometimes the specifications do not reflect up-to-date manufactur ing technology. Machine tool builders believe that consultation with the industry before machines are specified is inadequate.
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From page 66... ...
The solution to these problems is, to the extent pass i ble, to spec if y the parts to be produced and le t companies bid machines to fulfill the job. This approach takes advantage of the machine tool companies ' expertise in manufacturing and should result in expensive custom machines being bid only when absolutely necessary.
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From page 67... ...
As a result, we are totally dedicated to civilian customers. It is no longer economically practical for us to bid for or accept a government order.6 An Important Counter-Example A recent example of a procurement machine tool companies cite as exemplary, from both administrative and technical viewpoints, was the Water~liet arsenal purchase of an FMS.
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From page 68... ...
Although the bidding process took longer than normal, and although most companies said they did not expect to prof it from the sale to Watervliet, these firms were enthusiastic about participating because of possible commercial spinoff ~ . Experiences such as the Watervliet project can do much to change the generally negative perception that machine tool companies have of dealing directly with the government.
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From page 69... ...
~ On the other hand, virtually all prime contractors maintained some machine tool capability. Various reasons were given for thin.
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From page 70... ...
Thus, machine tool fabrication by prime contractors typically involves the shaping of cutting equipment, and some blank and mill grinding. Some respondents said that their firms regularly manufactured their own machine tools when the mechanics were simple and peculiar characteristics were required .
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From page 71... ...
e., subjects germane to machine tool character istics and specif ications. Several prime contractors commit more in certain years to manufacturing ~ esearch alone than does any s ingle domestic machine tool f irm.
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From page 72... ...
Because _ ~ large prime contractors are in a better position than most machine tool companies to develop and construct the sophisticated, one~of-a-kind machine tools that are often used for building or itical part. of advanced weapons systems.
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From page 73... ...
Prime contractors interviewed for this report stated that although U.S. machine tool builders have kept abreast of technological developments in some areas, they fall short in others.
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From page 74... ...
Experience With Foreign Suppliers A [though some prime contractors strongly prefer to buy from U
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From page 75... ...
machine tools came in for some of the strongest criticism. As the head of manufactur ing research at an aerospace f irm put it, The Japanese are more likely to give you a product that will run the first time: U.S.
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From page 76... ...
The Buy Amer ice AC t does not apply to machines purchased for a contractor's awn use; it does not apply to the Software used to run automated machinery nor does it apply to purchases from NATO countries, Switzerland, Australia, Israel, or Egypt, where the United States has Memoranda of Understanding (MOUs) waiving the Buy America requirements that might otherwise attach to the purchase of machine tools.
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From page 77... ...
, the government is authorized to procure and manage a stockpile of weapons parts and also of manuf actur ing equipment such as machine tools. WD ' s stockpiled machine tool (metal-cutting and -forming)
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From page 78... ...
A recent Army report, for example, asserted that use of the stockpile to provide machine tools for M1/M60 tank production would Cost a great deal of money [in machine tool rehabilitations and would not improve manufacturing methods above those used for the last fifty years..l5 Thus far, the stockpile concept has tended to discourage technological advance while running up substantial carrying charges for the taxpayer. INDUSTRIAL BASE RESPONSIVENESS In its effort to analyze this country's ability to respond ho wartime production requirements,, the DOD regularly publishes mobilization plans for specif ic weapons systems.
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From page 79... ...
That study, which cost more than S900,000 to complete, found that the new machine tools and production equipment required for mobilization are long lead items, not available off the shelf. It concluded that To meet mobilization requirements and update manufacturing methods will require 200 new machine tools and an additional 200 pieces of special equipment with a producible lead time of 18 to 24 months..!
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From page 80... ...
The reasons for this relative disadvantage of machine tool builders in the defense contracting business cannot be ascribed to any s ingle feature of procurement practices or industry structure. This report has described how delays, regulatory requirements, and lack of information have served to the disadvantage of the traditional machine tool builder.
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From page 81... ...
1962) for Adjustment of Imports of Machine Tools ("Petitions)
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From page 82... ...
~ ~ _ . ~ L~UC~ cecnnOl~y achievement level of Japanese machining centers and the production technology achievement level of Japanese package software are substantially inferior ho those achieved in the United States.
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From page 83... ...
S Army Armament Mater iel Readiness Command, I ndustr ial Base Respons iveness S tudy for Howi tzer, Medium, Self-Propelled lS5nun, M109A2 (May, 1978)
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