History of the Ammunition Industrial Base - JMC - U.S. Army

Ammunition and to use multi-year money for contracting annual production and replenishment.
They noted the boom-bust cycle of ammunition procurement made the marketplace too unstable
for ammunition producers. PNNL found ammunition companies/producers were either
consolidating or leaving to find new markets with higher profit margins. Without profits
commercial producers were foregoing capital investment in modernization, maintenance, and
R&D. The government had also failed to invest in the base. The ammunition budget was held in
low regard and was usually the bill-payer for other programs. PNNL also noted that the Army
had more sole source producers and less competition than at any time since before WWII.
Despite the poor state of the ammunition base, PNNL believed the Army was capable of
producing peacetime and replenishment requirements. However, this was only because
requirements were so low, the replenishment time-line was long, and the government base had so
much excess capacity. They noted that the industrial base was in near-crisis state and changes to
any of a number of variables could render the base incapable of meeting production
requirements. 156
From 1999-2002, the RAND Corporation conducted an extensive review of the
ammunition and industrial base. The main focus was on how to best privatize the munitions base
(this included ammunition production as well as the manufacturing arsenals). RAND noted that
statutory and regulatory policy required the privatization of government owned industry unless
the activity is inherently governmental, the private sector will not invest, national security
requires government control of employees, or the government can produce the same items at
lower cost. Based on their subsequent analysis, RAND concluded that none of the preceding
considerations were valid when it came to ammunition production. 157 RAND criticized the Army
historical imperative to own the ammunition base and the Army‟s “attachment” to legacy
munitions. At the same time, they noted that DoD buying strategy and the failure to modernize
were key elements in driving up the cost of munitions. 158
RAND provided five different options for dealing with the ammunition plants. They
rejected the status quo for a variety of reasons and then analyzed privatization; creation of a
Federal Government Corporation; consolidation of equipment and mission onto fewer plants;
and recapitalization--the movement of the entire organic base onto one multifunctional
installation. 159 Their analysis supported privatization as the best option (although they refrain
from making a recommendation). RAND cautioned that privatization could reduce capacity and
capability. 160 The results presented by RAND were considered but not accepted by the
ammunition community and this has not been the accepted solution to sizing the ammunition
industrial base.
In 2002 the National Academy of Sciences (NAS) published “Munitions Manufacturing:
A Call for Modernization.” Formerly a subordinate to the U.S. Army Tank-Automotive and
Armaments Command‟s (TACOM), Armaments Research, Development, and Engineering
Center (ARDEC) at Picatinny, New Jersey commissioned this study. The purpose of the study
156 PNNL, see Summary,. 1-46.
157 RAND Corporation, Briefing “PBD 407 Study and the Industrial Base Program Review,” 18 Dec 2001, passim.
158 Ibid, Slide 6.
159 RAND Corporation, “Freedom‟s Arsenal: A Strategy for Managing the Army‟s Arsenals and Ammunition Plants
(Draft),” March 2002, xix-xxii.
160 RAND, “PBD 407 Study,” slide 7.
51