The Aerospace Industries Association (AIA) is asking the Senate Armed Services Committee to include language in this year’s National Defense Authorization Act allowing the Pentagon to modify its contracts amid record inflation.
In a letter to Senate Armed Services Committee chair Jack Reed (D-R.I.) and Ranking Member James Inhofe (R-Okla.) the group says that inflation and “turmoil in global supply chains” are threatening the defense industry’s ability to meet its demand.
“While all parts of our economy are being affected, we are confident that potential damage to our national security is something that your committee recognizes and can address. In that spirit, we urge you to provide DoD with this vital contracting flexibility in the FY23 NDAA,” reads the letter, obtained exclusively by The Hill.
The heart of the problem: In the letter, AIA President and CEO Eric Fanning writes that most Pentagon contracts were negotiated on the assumption of a 2 to 3 percent annual inflation and properly functioning global supply chains.
Given higher inflation and other supply chain and workforce disruptions, businesses can face delays, cost increases, and a "significant exodus of workforce talent,” among other consequences, the letter stated.
“Rather than continuing to do business with DoD and lose money, many companies will choose to leave the DIB [defense industrial base] entirely and focus on the commercial market, where they can more readily pass along increased costs. This directly threatens our national security: our advanced technologies and capabilities will dwindle, competition will significantly decline, and the innovation America needs to stay ahead of our global competitors could evaporate,” Fanning wrote.
Quick state-of-play: The letter comes as the Senate is expected to take up its version of the annual defense policy bill next month. The committee passed the bill on a bipartisan 23-3 vote.
The Senate bill already includes language requiring a report on the impacts of inflation on the military and defense industrial base.