Radical Change Needed in Ammunition Procurement
The article in the September−October issue, “Small-Arms Ammunition Production and Acquisition: Too Many Eggs in One Basket?” was well researched, clear, and insightful. The three scenarios for analysis offered in the article are interesting as measures of the ammunition industrial base and about as good as any.
However, while single-site ammunition plants with multiple production lines, dwindling commodity suppliers, increasing cost of materials, and uncertain future demand are real problems, they should be viewed as symptoms of a problem that is worsened by poor management, lack of visionary leadership, and divergent priorities.
The Army, with Title 10 responsibility for Department of Defense (DOD) ammunition production, has created an environment with a single procurement source for many critical munitions components and raw materials (such as nitrocellulose, as pointed out in the article). The Army Material Command (AMC) over time has sacrificed funding for badly needed modernization of ammunition plant production lines and facilities, including backup systems. Ammunition plant funds have been routinely diverted to support other peacetime programs, which the authors accurately call the “peace dividend.”
Over the past 20 years, while serving three command tours in munitions plants and depots, I watched AMC routinely shift funding designated to upgrade munitions production, including demilitarization production. Using the “rob Peter to pay Paul” money management method, AMC promised to repay AMCCOM [Army Armament, Munitions, and Chemical Command], IOC [Army Industrial Operations Command], OSC [Army Operations Support Command], JMC [Joint Munitions Command], and so forth, but no reimbursement was forthcoming. Because DOD is directed by law to use AMC and does not have ammunition “buying power” or alternatives for procurement, the problem continued to grow.
What is not under AMC’s purview by law is the “specialty” munitions procured and managed by the individual services. In my opinion, this is because they are convinced that the Army is incapable of meeting their “special” needs and requirements. Given AMC’s track record, this is a prudent move.
A holistic defense munitions operation would make munitions cheaper and production more flexible. With mass purchasing of commodities, parts, and equipment and long-life contracts for ammunition plant facilities, DOD would have the buying power to generate commercial competition, thereby increasing quality and broadening the industrial base.
The simple solution is a radical change in how we do ammunition business. In short, the Program Executive Office Ammunition needs to become a Defense organization capable of truly managing Defense needs—and this needs to happen in the real joint world governed by Title 10 of the U.S. Code, chapter 38, not another pseudo Army-joint organization like JMC. Logically, direction of munitions production should fall under the Assistant Secretary of Defense for Acquisition, Technology, and Logistics, with supply chain management going to the Defense Logistics Agency (DLA). Today, DLA provides over 80 percent of all Defense supply needs, and it does so very well at competitive prices. DLA is the world-class sustainment organization. However, it does not procure or manage ammunition.
The Army has done due diligence in studying the ammunition problem. However, it doesn’t seem like Army senior leaders have read any of the studies. In my 20-plus years experience in munitions production, recommendations from RAND Corporation, Pacific Northwest National Laboratories, the Government Accountability Office, and the National Defense University have advocated a fundamental change in the management of our ammunition industrial base. Many recommendations have called for the privatization of the munitions production base. To be sure, some elements simply would not be profitable as a commercial single-buyer system, but that can be accounted for.
In the end, the Army (meaning AMC) has failed to implement study recommendations because AMC would lose access to easily accessed money appropriated for munitions production. Now more than ever, the need to privatize is paramount. DOD is anticipating lean budgets in the future. We must privatize munitions production or provide long-term GOCO [Government-owned contractor-operated] production contracts, and it must happen quickly.
The challenge is to break out of the old contracting model and realize that, with mandated short-term contracts, the contractor cannot be financially responsible for munitions production shortfalls. If the Army seriously addressed munitions production and production-base modernization, it would award long-term production contracts (for not less than 20 years) that allow GOCO operators to procure updated munitions production equipment and amortize that equipment over time. No manufacturer can procure, install, and amortize their equipment under the 5-year contracts offered by AMC.
I applaud the authors for taking on this tough and sensitive topic. They provide a thorough analysis of the problem, but I don’t think they address the solution. I agree that we (the Army) have placed too many eggs in one basket. However, the costs associated with ameliorating our single sources of failure are cost prohibitive. Now is the time to implement the findings of the studies mentioned above and manage what remains.