FY2024 NDAA: Defense Industrial Base Policy

INSIGHTi

FY2024 NDAA: Defense Industrial Base Policy
Updated January 8, 2024
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 Report R47751, The U.S. Defense Industrial Base: Background
and Issues for Congress). 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 and Senate considered an array of DIB-related provisions in their respective bills for a
National Defense Authorization Act for Fiscal Year 2024 (FY2024 NDAA; the House bill was designated
H.R. 2670 and the Senate bill was designated S. 2226). The enacted FY2024 NDAA (P.L. 118-31)
modifies and establishes numerous industrial base programs and policies. Table 1 summarizes key
provisions from H.R. 2670 (House-engrossed), S. 2226 (Senate-engrossed), and P.L. 118-31 (enacted).
Table 1. Selected Defense Industrial Base Provisions in the FY2024 NDAA
Selected provisions from H.R. 2670, S. 2226, and P.L. 118-31
House-passed (H.R. 2670)
Senate-passed (S. 2226)
Enacted (P.L. 118-31)
Investments and Incentives
Sec. 853 would direct DOD to
Sec. 831 in S. 2226 is similar to Sec.
Not adopted.
establish a public-private partnership
853 in H.R. 2670.
pilot program that would create
incentives (including loan guarantees)
for private equity investment in small
or nontraditional defense contractors.
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House-passed (H.R. 2670)
Senate-passed (S. 2226)
Enacted (P.L. 118-31)
Sec. 862 would amend 10 U.S.C.
No similar provision.
Not adopted.
§4817(d) to allow for use of the
Industrial Base Fund to support
recruitment, training, and retention of
the large surface combatant workforce.
Sec. 863 would redesignate the
No similar provision.
Not adopted.
Industrial Base Fund as the “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
Not adopted.
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.
Sec. 1080 adopts the Senate provision.
§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.
Sourcing and Supply Chains
Sec. 861 would amend 10 U.S.C.
No similar provision.
Sec. 851 adopts the House provision.
§4811(a) to add a new 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
No similar provision.
Not adopted.
contractors to disclose the provenance
of advanced batteries and related
components.

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House-passed (H.R. 2670)
Senate-passed (S. 2226)
Enacted (P.L. 118-31)
Sec. 866 would prohibit DOD
No similar provision.
Sec. 825 adopts the House provision,
contracting with entities that use
with amendments to define applicable
logistics software subject to PRC or
entities as those that that provide data
foreign adversary control or influence
to covered logistics platforms (defined
and bar certain port authorities from
as platforms and similar systems
using such software.
provided or sponsored by, or affiliated
with, the PRC or a commercial entity
under PRC control). It also amends
Chapter 503 of Title 46 to restrict
certain port and marine infrastructure
entities from using covered logistics
platforms.
Sec. 867 would direct DOD to
No similar provision.
Sec. 856 adopts the House provision.
establish a pilot program for a private
entity to analyze and continuously
monitor DIB supply chains for issues,
vulnerabilities, and improvement
opportunities.
Sec. 868 would require a study by the
No similar provision.
Not adopted; however, the conference
Comptrol er General of DOD supply
report to accompany H.R. 2670
chain dependence on foreign sources
(H.Rept. 118-301) directs the
for certain end items and components.
Comptrol er General to provide a
briefing to the House and Senate
Armed Services Committees on DOD
supply chain dependence on foreign
sources for certain end items and
components.
Sec. 869 would establish an enhanced
No similar provision.
Sec. 835 adopts the House provision.
domestic 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
No similar provision.
Not adopted.
of Strategic Capital 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
No similar provision.
Sec. 245 adopts the House provision.
establish a critical reserve of long-lead
items and components to enable
accelerated delivery of certain
munitions.

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House-passed (H.R. 2670)
Senate-passed (S. 2226)
Enacted (P.L. 118-31)
No similar provision.
Sec. 216 would direct DOD to
Not adopted.
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.
Not adopted; however, H.Rept. 118-
§4864(a) to add traveling wave tube
301 directs the Under Secretary of
and traveling wave tube amplifiers
Defense to provide a briefing on the
(TWTA) to the list of items that must
state of the TWTA industrial base to
be procured from the NTIB.
the congressional defense committees.
No similar provision.
Sec. 866 would establish an enhanced
Not adopted.
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. 901 would codify in statute
Sec. 903 adopts the Senate provision.
DOD’s Office of Strategic Capital.
No similar provision.
Sec. 907 would direct DOD to
Not adopted.
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.
Sec. 1415 would state that it is U.S.
Sec. 1057 would direct DOD to
Sec. 1414 adopts the House provision.
policy to expand secure sources of
develop a strategy to reduce the
supply of critical minerals, and direct
reliance of DOD’s critical mineral
DOD to develop a strategy to reduce
supply chains on certain foreign
the reliance of DOD’s critical mineral
sources, with the goal of achieving
supply chains on certain foreign
independence from such sources by
sources, with the goal of achieving
2035.
independence from such sources by
2035.

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House-passed (H.R. 2670)
Senate-passed (S. 2226)
Enacted (P.L. 118-31)
No similar provision.
Sec. 1707 would direct DOD to
Sec. 1513 adopts the Senate provision.
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
No similar provision.
Sec. 126 adopts the House provision,
ensure that no government-operated
with an amendment restricting the
drydock can compete for private
provision’s scope to contracts awarded
sector non-nuclear surface ship
in San Diego.
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
No similar provision.
Not adopted; however, H.Rept. 118-
conduct a study evaluating the extent
301 directs the Assistant Secretary of
and impact of consolidation,
Defense for Industrial Base Policy to
competition, and anticompetitive
develop a merger and acquisition
behavior within the defense industry.
(M&A) impact model and provide
briefings to the House and Senate
Armed Services Committees.
No similar provision.
Sec. 832 would require the parties to
Sec. 857 adopts the Senate provision.
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 the House-engrossed text of H.R. 2670, the Senate-engrossed text of S. 2226, P.L. 118-31, and
the conference report to accompany H.R. 2670 (H.Rept. 118-301).
Discussion
Congress has long evinced interest in the DIB’s ability to support 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 nation’s
defense suppliers are well-positioned to supply DOD with the weapons, munitions, and other equipment
necessary to prevail in a great power conflict.
The enacted FY2024 NDAA addresses 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
chains reflect concerns about DOD dependence on foreign suppliers (especially those controlled or
influenced by potential adversaries) and other vulnerabilities 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.

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Investments and Incentives
The enacted FY2024 NDAA designates businesses performing under a U.S. contract in Australia and the
United Kingdom as domestic sources for the purposes of Title III of the Defense Production Act of 1950
(DPA). This makes them eligible to receive loans, loan guarantees, purchase commitments, equipment,
and related U.S. government assistance intended to expand defense production capacity (Sec. 1080;
previously, such assistance had been limited to businesses located in the United States and Canada).
The House and Senate-engrossed bills for an FY2024 NDAA contained other provisions relating to DIB
investments and incentives that were not included in P.L. 118-31. H.R. 2670 would have expanded 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) as well as certain material and munition acquisitions,
infrastructure projects, and “alternative acquisition pathways” (Sec. 863). S. 2226 would have authorized
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). Both bills also would have
established a public-private partnership program to incentivize private equity investment in small or
nontraditional defense businesses (H.R. 2670 Sec. 853 and S. 2226 Sec. 831).
Sourcing and Supply Chains
The enacted FY2024 NDAA requires DOD’s National Technology and Industrial Base (NTIB) strategy to
aim at reducing U.S. dependence on services, supplies, or materials from potential adversaries (Sec. 851),
prohibits DOD from contracting with entities using adversary-controlled logistics software (Sec. 825),
and directs DOD to use government and commercial tools to analyze certain supply chains (Sec. 856),
statutorily establishes an enhanced ‘Buy American’ requirement for major defense acquisition programs
(Sec. 835), authorizes a critical reserve of certain long-lead munition items (Sec. 245), and statutorily
establishes the Office of Strategic Capital (Sec. 903; DOD initially created the Office of Strategic Capital
in 2023 without reference to Congress). Finally, it requires a DOD strategy to achieve critical mineral
supply chain independence (Sec. 1414) and establishes a pilot program for cybersecurity partnerships
with U.S. semiconductor manufacturers (Sec. 1513).
The House and Senate bills contained other provisions relating to sourcing and supply chains that were
not adopted. H.R. 2670 would have required DOD contractors to disclose the provenance of advanced
batteries (Sec. 865) and prohibited DOD’s Office of Strategic Capital from investing in PRC companies
(Sec. 872). S. 2226 would have established a program to develop and maintain standards for commercial
microelectronics acquired by DOD (Sec. 216), restrict eligible sources of traveling wave tubes to the
NTIB (Sec. 835) and enhanced the domestic content requirement for Navy shipbuilding programs (Sec.
866). It would have also established a pilot program to assess and mitigate adversarial capital flows into
the DIB (Sec. 907).
Competition and Consolidation
The enacted FY2024 NDAA directs the Navy to prevent government drydocks from competing with
private drydocks for non-nuclear surface ship maintenance contracts in San Diego, absent a determination
of insufficient private sector competition (Sec. 126). It also requires 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 concurrently to DOD (Sec.
857).

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The House bill contained a provision requiring a Government Accountability Office study on
consolidation, competition, and anti-competitive behavior among defense contractors that was not
adopted (Sec. 832).


Author Information

Luke A. Nicastro

Analyst in U.S. Defense Infrastructure Policy




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IN12221 · VERSION 3 · UPDATED

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