INSIGHTi

FY2024 NDAA: Defense Industrial Base Policy
August 15, 2023
Background
The defense industrial base (DIB) is the network of organizations, facilities, and resources that supplies
the U.S. government—particularly the Department of Defense (DOD)—with materials, products, and
services for defense purposes. The DIB is large and complex, encompassing private and public entities
engaged in activities ranging from basic research to the assembly and delivery of complete weapons
systems (for more information, see CRS In Focus IF10548, Defense Primer: U.S. Defense Industrial
Base). Given its role in enabling military operations, the DIB tends to receive considerable attention from
Congress, particularly as part of the annual defense authorization and appropriation process.
The House-passed (H.R. 2670) and Senate-passed (S. 2226) versions of a National Defense Authorization
Act for Fiscal Year 2024 (FY2024 NDAA) each contain numerous provisions that would modify or
establish DIB-related programs or policy. Table 1 below summarizes key provisions from H.R. 2670 and
S. 2226.
Table 1. Selected Defense Industrial Base Provisions
Selected provisions from the House and Senate bills for an FY2024 NDAA
House-passed (H.R. 2670)
Senate-passed (S. 2226)
DIB Investments and Incentives
Sec. 853 would direct DOD to establish a public-private
Sec. 831 in S. 2226 is similar to Sec. 853 in H.R. 2670.
partnership pilot program that would create incentives
(including loan guarantees) for private equity investment in
small or nontraditional defense contractors.
Sec. 862 would amend 10 U.S.C. §4817(d) to allow for use
No similar provision.
of the Industrial Base Fund to support recruitment, training,
and retention of the large surface combatant workforce.
Congressional Research Service
https://crsreports.congress.gov
IN12221
CRS INSIGHT
Prepared for Members and
Committees of Congress

---

Congressional Research Service
2
House-passed (H.R. 2670)
Senate-passed (S. 2226)
Sec. 863 would redesignate the Industrial Base Fund as the
No similar provision.
“Industrial Base and Operational Infrastructure Fund” and
would expand the fund’s uses to include strategic/critical
materials and munitions acquisitions, certain infrastructure
projects, and the acquisition and deployment of capabilities
and prototypes through alternative acquisition pathways
(including Middle Tier of Acquisition).
No similar provision.
Sec. 834 would allow DOD to carry out a pilot program to
provide capital assistance to support investment in the DIB.
Authorized assistance would include: loans or loan
guarantees for investors; the direct acquisition of equity in
eligible entities; and the provision of technical assistance.
No similar provision.
Sec. 1080 would amend 50 U.S.C §4552(7) to include
businesses in Australia and the United Kingdom as domestic
sources for the purposes of Title III of the Defense
Production Act of 1950. This provision would also create
new reporting requirements related to the use of Title III
authorities for such businesses.
Sourcing and Supply Chain Resilience
Sec. 861 would amend 10 U.S.C. §4811(a) to add a new
No similar provision.
objective for the national technology and industrial base
(NTIB) requiring that future NTIB strategies reduce DOD
dependence on potential adversary suppliers.
Sec. 865 would require DOD contractors to disclose the
No similar provision.
provenance of advanced batteries and related components.
Sec. 866 would prohibit DOD contracting with entities that
No similar provision.
use logistics software subject to PRC or foreign adversary
control or influence and bar certain port authorities from
using such software.
Sec. 867 would direct DOD to establish a pilot program for
No similar provision.
a private entity to analyze and continuously monitor DIB
supply chains for issues, vulnerabilities, and improvement
opportunities.
Sec. 869 would statutorily establish an enhanced domestic
No similar provision.
content requirement for major defense acquisition programs
(consistent with that published at 87 FR 12780) and require
DOD to issue rules to determine treatment of certain
foreign end products under certain circumstances.
Sec. 872 would prohibit DOD’s Office of Strategic Capital
No similar provision.
from investing in entities incorporated under laws of the
People’s Republic of China or subject to the ownership or
control of such entities.
Sec. 899B would authorize DOD to establish a critical
No similar provision.
reserve of long-lead items and components to enable
accelerated delivery of certain munitions.

---

Congressional Research Service
3
House-passed (H.R. 2670)
Senate-passed (S. 2226)
No similar provision.
Sec. 216 would direct DOD to establish a program within
the National Security Agency (NSA) to develop and maintain
standards and requirements to ensure the confidentiality,
integrity, and availability of commercial-off-the-shelf
microelectronics acquired by DOD. This provision would
also create a Microelectronics Assurance Executive Agent
and direct DOD to meet certain contracting requirements
for application-specific integrated circuits.
No similar provision.
Sec. 835 would amend 10 U.S.C. §4864(a) to add traveling
wave tube and traveling wave tube amplifiers to the list of
items that must be procured from the NTIB.
No similar provision.
Sec. 866 would establish an enhanced domestic content
requirement for Navy shipbuilding programs. For the
purposes of the Buy American Act (41 U.S.C. §§8301-8305),
this provision would require 65% of the costs of
manufactured articles, materials, or supplies procured for
shipbuilding to derive from mining, production, or
manufacturing activities conducted in the United States. This
proportion would rise to 75% in 2028 and 100% in 2033.
No similar provision.
Sec. 907 would direct DOD to establish a pilot program to
assess and mitigate certain impacts of adversarial capital
flows into defense-related industries. This provision would
authorize analysis of capital flows, coordination and
outreach relating to investment decision-making, securing
vital tangible and intangible assets, capital assistance to
certain entities, and improving analytical tools and practices.
No similar provision.
Sec. 1057 would direct DOD to develop a strategy to
reduce the reliance of DOD’s critical mineral supply chains
on certain foreign sources, with the goal of achieving
independence from such sources by 2035.
No similar provision.
Sec. 1707 would direct DOD to establish a pilot program to
enable the NSA Cybersecurity Col aboration Center to
work with U.S. semiconductor manufacturers to improve
the cybersecurity of their supply chains.
Competition and Consolidation
Sec. 137 would direct the Navy to ensure that no
No similar provision.
government-operated drydock can compete for private
sector non-nuclear surface ship maintenance contracts
(unless a determination of insufficient private sector
competition is made pursuant to 10 U.S.C. §2466).
Sec. 873 would require GAO to conduct a study evaluating
No similar provision.
the extent and impact of consolidation, competition, and
anticompetitive behavior within the defense industry.
No similar provision.
Sec. 832 would require the parties to certain corporate
transactions covered under Section 7A of the Clayton Act
(15 U.S.C. §18a) to provide DOD with the same information
they are currently required to provide to the Department of
Justice or the Federal Trade Commission.
Source: CRS analysis of H.R. 2670 (House-engrossed version) and S. 2226 (Senate-engrossed version) and associated
documentation.

---

Congressional Research Service
4
Discussion
Congress has long evinced interest in the DIB’s ability to support U.S. strategic objectives and meet
military requirements. In the context of geopolitical developments such as intensifying U.S. competition
with China, and Russia’s 2022 invasion of Ukraine, some Members have questioned whether the DIB is
well positioned to supply the U.S. military with the weapons, munitions, and other equipment necessary
to prevail in a great power conflict.
The FY2024 NDAA bills address numerous congressional priorities relating to the DIB. Provisions
relating to investment and related incentives reflect the views of some Members that the industrial base
lacks adequate productive capacity and access to capital. Provisions relating to sourcing and supply chain
security reflect concerns about the dependence of DOD on foreign suppliers (especially those controlled
or influenced by potential adversaries) and other vulnerabilities or inefficiencies within existing supply
chains, as well as congressional interest in the economic impact of increasing procurement from domestic
sources. Finally, those provisions relating to competition and consolidation reflect concerns about the
structural composition and overall economic health of the DIB.
DIB Investments and Incentives
The House and Senate NDAA bills would each modify or establish programs intended to strengthen the
DIB through providing or facilitating investments, incentives, and related assistance for industrial base
stakeholders.
H.R. 2670 contains provisions that would expand use of the Industrial Base Fund—which currently
supports industrial base monitoring and expansion, as well as efforts to address urgent operational needs
and supply chain vulnerabilities—to include:
• support for the large surface combatant workforce (Sec. 862); and
• the acquisition of strategic and critical materials and munitions, certain infrastructure projects,
and the use of alternative acquisition pathways, such as Middle Tier Acquisition (Sec. 863).
S. 2226 would authorize a pilot program to provide capital assistance (including loans, loan guarantees,
and the direct acquisition of minority equity) as a means of increasing investment in the DIB (Sec. 834). It
would also designate businesses located in Australia and the United Kingdom as domestic sources for the
purposes of the Defense Production Act’s Title III. This would make them eligible to receive assistance
from the U.S. government in the form of loans, loan guarantees, purchase commitments, the provision of
equipment, and related measures (Sec. 1080; under current statute, such assistance is limited to businesses
located in the United States and Canada).
Both bills also contain a similar provision that would establish a public-private partnership program to
provide incentives (e.g., loan guarantees) for private equity investment in small or nontraditional
businesses producing advanced defense capabilities (H.R. 2670 Sec. 853 and S. 2226 Sec. 831).
Sourcing and Supply Chain Resilience
The House and Senate NDAA bills would each create restrictions or requirements concerning the sources
from which DOD may procure materials, products, or services. Each bill would also establish or modify
programs intended to improve the resilience of defense-related supply chains.
H.R. 2670 would add a new objective for DOD’s National Technology and Industrial Base (NTIB)
strategy requiring the reduction of dependence on services, supplies, or materials from potential
adversaries (Sec. 861). The House bill would also require DOD contractors to disclose the provenance of

---

Congressional Research Service
5
advanced batteries (Sec. 865), prohibit DOD from contracting with entities using adversary-controlled
logistics software (Sec. 866), and establish a pilot program for a private entity to carry out continuous
monitoring of DOD supply chains (Sec. 867). Additionally, it would statutorily establish an enhanced
‘Buy American’ requirement for major defense acquisition programs (Sec. 869), prohibit DOD’s Office of
Strategic Capital from investing in Chinese companies (Sec. 872), and authorize a critical reserve of long-
lead items and components for certain munitions (Sec. 899B).
S. 2226 would establish a program to develop and continuously update standards for commercial
microelectronics acquired by DOD (Sec. 216), restrict eligible sources of traveling wave tubes to the
NTIB (Sec. 835) and enhance the domestic content requirement for Navy shipbuilding programs (Sec.
866). It would also establish a pilot program to assess and mitigate adversarial capital flows into the DIB
(Sec. 907), require a DOD strategy to achieve critical mineral supply chain independence (Sec. 1057), and
establish a pilot program for cybersecurity partnerships between the Cybersecurity Collaboration Center
and U.S. semiconductor manufacturers (Sec. 1707).
Competition and Consolidation
The House and Senate NDAA bills would each provide direction and require reporting to enhance
government cognizance of competition, consolidation, and related trends within the DIB.
H.R. 2670 would direct the Navy to prevent government drydocks from competing with private drydocks
for non-nuclear surface ship maintenance contracts, absent a determination of insufficient private sector
competition (Sec. 137) and require a Government Accountability Office study of the prevalence of
consolidation, competition, and anti-competitive behavior in the defense industry (Sec. 873).
S. 2226 would require major defense suppliers involved in corporate transactions requiring notification
of, and the provision of information to, antitrust authorities (pursuant to 15 U.S.C. §18a) to provide the
same notification and information to DOD (Sec. 832).


Author Information

Luke A. Nicastro

Analyst in U.S. Defense Infrastructure Policy




Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff
to congressional committees and Members of Congress. It operates solely at the behest of and under the direction of
Congress. Information in a CRS Report should not be relied upon for purposes other than public understanding of
information that has been provided by CRS to Members of Congress in connection with CRS’s institutional role.
CRS Reports, as a work of the United States Government, are not subject to copyright protection in the United
States. Any CRS Report may be reproduced and distributed in its entirety without permission from CRS. However,
as a CRS Report may include copyrighted images or material from a third party, you may need to obtain the
permission of the copyright holder if you wish to copy or otherwise use copyrighted material.

---

Congressional Research Service
6

IN12221 · VERSION 1 · NEW

---