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Mele CORPORATION NATIONAL DEFENSE RESEARCH INSTITUTE Findings from Existing Data on the Department of Defense Industrial Base Nancy Y. Moore, Clifford A. Grammich, Judith D. Mele Approved for public release; distribution unlimited For more information on this publication, visit www.rand.org/t/rr614 Library of Congress Cataloging-in-Publication Data ISBN: 978-0-8330-8704-1 Published by the RAND Corporation, Santa Monica, Calif. © Copyright 2014 RAND Corporation R ® is a registered trademark. Cover image by Mike Kiev/Thinkstock Limited Print and Electronic Distribution Rights This document and trademark(s) contained herein are protected by law. This representation of RAND intellectual property is provided for noncommercial use only. Unauthorized posting of this publication online is prohibited. Permission is given to duplicate this document for personal use only, as long as it is unaltered and complete. Permission is required from RAND to reproduce, or reuse in another form, any of its research documents for commercial use. For information on reprint and linking permissions, please visit www.rand.org/pubs/permissions.html. The RAND Corporation is a research organization that develops solutions to public policy challenges to help make communities throughout the world safer and more secure, healthier and more prosperous. RAND is nonprofit, nonpartisan, and committed to the public interest. RAND’s publications do not necessarily reflect the opinions of its research clients and sponsors. Support RAND Make a tax-deductible charitable contribution at www.rand.org/giving/contribute www.rand.org Preface Policymakers seek ways to ensure (or monitor) the health and effective management of the defense supplier base. To that end, members of the House Armed Services Committee plan to require that the Department of Defense (DoD) provide semiannual reports that include com- prehensive and thorough information on the supplier base. In response, the Office of the Secretary of Defense recently conducted a very large sector- by-sector, tier-by-tier survey of the supplier base; the survey was very detailed but, as with many surveys, it was workload-intensive and time-consuming to do. This report demonstrates how, using extant data rather than conducting additional surveys, DoD may gain the infor- mation it needs to respond to Congressional requests and better understand its supplier base. This could mitigate the need for additional surveys or allow DoD to focus surveys on issues for which there is no other way to gather information. This report should be of interest to policymakers concerned with DoD acquisition, industrial-base policy, and small-business policy. It builds on RAND experience in analyzing data from the Federal Procurement Data System (FPDS) and System for Award Management (SAM, formerly the Central Contractor Registration) to provide insight on DoD’s prime, or Tier 1, contractors and its relationships with them. It extends this work to the Federal Funding Accountability and Transparency Act (FFATA) Subaward Reporting System (FSRS) on Tier 2 suppliers, for which data first became available in 2010. Combining FPDS, SAM, and FSRS data can quickly and relatively inexpensively yield information for DoD on the Tier 1 and Tier 2 supplier base and provide the information the House Armed Services Committee seeks. Such data can also yield information on Tier 1 and Tier 2 suppliers by weapon system. This research was conducted within the Acquisition and Technology Policy Center of the RAND National Defense Research Institute, a federally funded research and develop- ment center sponsored by the Office of the Secretary of Defense, the Joint Staff, the Unified Combatant Commands, the Navy, the Marine Corps, the defense agencies, and the defense Intelligence Community. For more information on the Acquisition and Technology Policy Center, see http://www. rand.org/nsrd/ndri/centers/atp.html or contact the director (contact information is provided on the web page). iii Contents Preface ........................................................................................................... iii Summary ........................................................................................................vii Acknowledgments ............................................................................................. xi Abbreviations ..................................................................................................xiii CHAPTER ONE Data on the DoD Supply Base ............................................................................... 1 CHAPTER TWO Data Coverage and Some Overall Findings on Data Quality and Specific Uses ................... 9 CHAPTER THREE Findings on Contractor Subaward Data ..................................................................19 CHAPTER FOUR Industry Subaward Data .................................................................................... 27 CHAPTER FIVE Weapon System Subaward Data ............................................................................39 CHAPTER SIX Natural Disaster Risk Data ..................................................................................51 CHAPTER SEVEN Conclusions and Recommendations .......................................................................57 References .......................................................................................................61 v Summary Members of Congress and other policymakers have been seeking ways to ensure (or monitor) the health and effective management of the defense supplier base. In response, the Department of Defense (DoD) launched a Sector-by-Sector, Tier-by-Tier assessment to better understand and quantify the defense industrial base. One part of this initiative includes extensive surveys of about 5,000 companies that provide defense goods and services. Given the time and expense of such surveys, as well as diminishing budgets, DoD could benefit from faster and cheaper ways to learn about the industrial base from existing data, which are more comprehensive than that in a survey sample and are continually collected to enable tracking of trends. This report explores how DoD can gain information on its industrial base by combining data that the federal government already collects. It demonstrates through sample analyses that such data could answer questions that policymakers may have on DoD- wide suppliers, contractors, industries, weapon systems, and supply-chain risks. Sources of Data The federal government has a number of systems that contain data on prime contractors, sub- contractors, and their locations. All businesses seeking prime contracts from the federal government must register in the System for Award Management (SAM). SAM registrants must provide information on their annual revenue, number of employees, and the industries in which they seek to provide goods and services. The Federal Procurement Data System—Next Generation (FPDS-NG) contains contract actions for all federal purchases above the $3,000 micropurchase threshold. Contract-action data contain the dollar value of the total award and the specific obligation for the action, industry and product and service codes for the goods and services being procured, and other contractor characteristics, including locations. The U.S. Geological Survey provides natural-hazard data for the contiguous United States on earthquakes, hurricanes, tornadoes, and floods by ZIP code area. These data can help iden- tify places where DoD goods and services are provided and that may present a supply risk. The relatively new Federal Funding Accountability and Transparency Act (FFATA) Sub- award Reporting System (FSRS) provides data on contract subawards. Its reporting require- ments have expanded over time, so that now prime contracts with a value greater than or equal to $25,000 must report subawards (exempting contractors with annual revenue of less than $300,000). vii