▶ 0:12:23Elicit Finance and International Finance Institutions will come to order. Without objection, the chairman is authorized to declare a recess of the committee at any time. Today's hearing is titled Securing the Supply Chain, the Defense Production Act in Focus. Without objection, all members will have five legislative days within which to submit extraneous materials for inclusion in the record. I now recognize myself for four minutes for an opening statement.
▶ 0:12:48Good morning and welcome to today's national security subcommittee hearing securing the supply chain the defense production act in focus which is devoted to evaluating the defense production act ahead of its expiration in September. This year, this subcommittee has had a a June hearing and a July briefing that provided fundamental overview of DPA for members of Congress.
▶ 0:13:11We convene here today at Wright Patterson Air Force Bea base because of its significance in implementing DPA's title 3 through Writ's hosting of major air force commands involved in defense acquisition. This ensures that title 3 funded defense uh funded capabilities are integrated into operational systems. It affects the base sustainment activities and enhances its ability to address national industrial base vulnerabilities.
▶ 0:13:37My colleagues and I are grateful for the opportunity to address uh the critical role of Wright Patterson Air Force Base in executing DPA's Title 3 authorities and the urgent need to modernize and enhance these powers uh to strengthen our national security. We will feature two panels. The first offering military officials perspective on the current DPA functionality and the second panel incorporating feedback from civilian defense contractors from our region on today's procurement landscape.
▶ 0:14:05Enacted in 1950 during the Korean War, DPA was designed to secure America's industrial base for national emergencies, prioritizing domestic production over foreign reliance. Today as our dependence on foreign critical materials, semiconductors, rare earth materials, uh grows, the DPA's importance is undeniable.
▶ 0:14:26However, from 2018 to 204 there's been a significant change in the pace of uh some of the title 3 activity. The CO 19 pandemic exposed uh a reactive posture uh provi proving that waiting for crisis results in a delayed response and and not always well thought out. Modernizing DPA demands a proactive approach to bolster domestic capabilities.
▶ 0:14:54Right Pat is central to addressing these challenges through the air force research uh labs executive agent program office. RIPAT manages Title 3 projects to expand manufacturing capacity uh for advanced materials but also for um older technologies and uh nevertheless limitations persist. Streamlining the DPA process could enable faster agreements and expand flexible contracting.
▶ 0:15:23Increasing funding flexibility would allow right to prioritize emerging technologies as well as uh improving existing supply chains. Reauthorizing DPA offers a chance to reset and realign its authorities with today's threats. By enhancing right path role through simplified procurement, expanded funding and proactive collaboration, we can rebuild a re a more resilient industrial base.
▶ 0:15:52I urge uh this committee to consider an I urge this committee to reconsider the defense production act and the opportunity we have before us to modernize it I would now yield my time and I will recognize the chairman of the full committee French Hill for one minute.
▶ 0:16:16They had four minutes on the time.
▶ 0:16:19Well, thank you, Mr. Chairman, it's great to be here in your home state of Ohio and here at Wright Patterson with our colleagues. America's navigating one of the most dangerous and complex global threat environments in recent history. Our adversaries are accelerating innovation, scaling production, and heavily investing in their national defense capabilities. It's critical that America keeps pace and expands our dominance as the leader in the free world.
▶ 0:16:45that requires not just military might, but economic resilience, financial agility, and industrial strength. During today's field hearing, we'll explore ways to use the Defense Production Act to secure supply chains and strengthen our domestic industrial base while ensuring that our federal agencies have the tools they need to meet 21st century threats threats.
▶ 0:17:06The DPA needs to be anchored in its strategic goals embedded in the Truman administration, but be modernized, reorganized, and focused for these 21st century challenges. I thank Chairman Davidson for his leadership on our subcommittee and look forward to today's discussion. I yield back. Thanks, Chairman Hill. Today, we will divide our witnesses into two panels. For the first panel, we welcome the testimony of Mr.
▶ 0:17:29Jeffrey Frankston, the acting deputy assistant secretary of defense for resilience at the office of the assistant secretary of defense for industrialbased policy. Uh also Dr. Charles Ormsby, acting director of the materials and manufacturing directorate at Air Force Research Laboratory. We thank you both for taking time to be here. Uh you will each be recognized for five minutes to give an oral presentation of your testimony.
▶ 0:17:56Without objection, your written statements will be made part of the record. Mr. Frank, Mr. Frankston, you're now recognized for five minutes for your oral statement.
▶ 0:18:04Thank you, sir. Uh, Chairman Hill, uh, Vice Chairman, uh, Committee Chairman Heisenga, Subcommittee Chairman Davidson, Representative Moore, uh, good morning. Thank you for the opportunity to speak with you today on the critical role the Defense Production Act plays in ensuring the United States maintains the industrial strength needed to support the interim national defense strategic guidance and sustain its competitive edge.
▶ 0:18:26It's an honor to uh speak to you for this aviation geek in this facility to talk about the industrial base and building back to where we need to be. Um unlike some of the airplanes in this facility, the DPA is not a cold war relic. Uh it is a vital statutory tool, one that enables the department to identify and respond to industrial shortfalls, reinforce supply chain integrity and resilience, and accelerate production in support of urgent operational needs.
▶ 0:18:56In an era where geopolitical competition is intensifying, particularly from China, industrial capacity remains a key determinant of our deterrence. We continue to see challenges that test our industrial resilience. And we have seen renewed cyber attacks targeting US aerospace and ship building firms, expanded Chinese restrictions on exports of critical minerals, and mounting cost pressures on cross defense manufacturing. Our shipyards are overburdened.
▶ 0:19:21Our munition suppliers are operating at maximum throughput, but still still falling short of shurge demands. These challenges are cumulative and compounding, and they demand more than reactive procurement. They require flexibility and coordination between government and industry, and the DPA provides that and more. Revitalizing the defense industrial base is foundational to restoring deterrence and rebuilding our military.
▶ 0:19:43Under this administration's leadership, we are executing a deliberate data-driven strategy to rebuild US defense production capacity and shore up domestic supply chains. We're leveraging key authorities like DPA Title 3 to address fragile nodes across priority sectors like munitions and strategic and critical minerals.
▶ 0:20:01We have reduced barriers to entry through to expand participation in the defense industrial base for small businesses and non-traditional vendors through operational uh through other transactional authorities, flexible acquisition vehicles and improved acquisition guidance. We are fostering competition and accelerating innovation. These vehicles offer a unique ability to scale the department's effort to force compet foster competition and collaboration between the government, traditional businesses and non-traditional vendors.
▶ 0:20:29Efforts like this are about more than improving industrial capacity. They are part and parcel to ensuring a resilient, responsive, and adequately distributed defense complex capable of meeting both wartime demands and maintaining a credible military posture that effectively deters our adversaries. The DoD uses the DPA every day in our mission to safeguard vital US national interests. Title One authorizes the president to require industry to accept and prioritize contracts and orders to promote the national defense.
▶ 0:20:59We leverage the Title One authorities for priority capabilities, including long-range fires, integrated missile defense, and replenishment of critical munitions. We are taking active steps to continue to improve the defense priorities and allocation system, including clearer onboarding guidance for new suppliers, rapid internal approval processes, and streamline compliance mechanisms for small and mid-size vendors.
▶ 0:21:21Title three is a force multiplier where market dynamics alone are insufficient to ensure our domestic industrial base has the capabilities we need for national defense. In fiscal years 2020 through 2024, approximately 2.8 8 billion was awarded to 194 projects under this program. So far in FY25, the program has made awards totaling more than 500 million and these investments are complemented by 88 million in total recipient cost shares since the beginning of the fiscal year.
▶ 0:21:50They are these investments go uh just a sample go towards restoring critical chemical production, expanding domestic manufacturing for solid rocket motors, establishing secure supply chains for strategic and critical minerals and materials and in concert with our allies and partners. Um these investments are also designed to improve economic viability where sustained demand is critical to maintaining a healthy market and resilient industrial base. Title 7 is a key enabler of investment screening and supply chain protection.
▶ 0:22:18Um the department co-leads approximately 6% of all committee on foreign investment of the United States or CPHAS reviews uh and has referred more than 75 non-notified transactions just in the past year. These authorities allow us to identify and present and prevent adversarial capital from gaining control over sensitive production pathways. The recent expansion of citius review over more real estate sites is a good first step, but we need to build on this foundation. The department strongly supports full reauthor reauthorization of the DPA.
▶ 0:22:48Let me close by underscoring that deterrence is built long before the potential for conflict emerges. It is built in our factories, on our shop floors, and in the continuity of our supply chains. The DPA is how we turn strategic priorities into industrial reality. It's how we ensure our war fighters are not waiting for parts, materials, or readiness itself. I look forward to your questions and continued collaboration in this shared mission.
▶ 0:23:09Thank you, Mr. Frankston. Mr. Ormsby or Dr. Orangeby, you are now recognized for 5 minutes for your oral statement.
▶ 0:23:15Subcommittee Chairman Davidson, uh, Committee Chairman Hill, Vice Chairman Heisinga, and Representative Moore. Good morning. Uh, thank you for the opportunity to testify today. I'm happy to speak regarding the Defense Production Act title 3 program. I will discuss the Executive Agent Program Office, uh, our role, our history, and the status in executing the Defense Production Act title three.
▶ 0:23:38I serve as the acting director of the materials and manufacturing directorate within the air force research laboratory headquartered here at Wright Patterson Air Force Base. And in this position, I lead the Defense Production Act title 3 executive agent program office.
▶ 0:23:52The executive agent program office is staffed by a multiddisciplinary team including program managers, scientists, engineers, national environmental policy experts, uh purchase agreement specialists, financial managers, and other subject matter experts required to execute often complex and unique projects. The executive agent program office is central to the practical execution of defense production act title 3 investments for the department of defense.
▶ 0:24:21While the executive agent program office manages the operational and technical aspects, the projects are authorized and funded by the office of the under secretary of defense for acquisition and sustainment. Specifically, the manufacturing capability expansion and investment prioritization directorate within industrial-based policy is responsible for the title 3 program and its funding.
▶ 0:24:43This organizational structure indicates a clear division of labor with industrial-based policy providing the strategic guidance and financial oversight and the materials and manufacturing directorate that I represent serving as the primary technical and execution arm. I'm pleased to have Mr. Jeffrey Frankston, deput act acting deputy assistant secretary for industrial-based resilience. Joining me today, the executive agent program office initiates project solicitations through a funding opportunity announcement.
▶ 0:25:13We issued a hybrid funding opportunity announcement in July of 2019, which allows for both unsolicited inputs from industry and government initiated calls for specific proposals addressing vetted requirements. We are also executing other transactions using a Washington headquarters services procurement vehicle. We are executing 109 technical investment agreements from the funding opportunity announcement.
▶ 0:25:42Additionally, we are processing one other transaction prototype award that will include project management support and we are providing purchase agreement agreements officer representative and project management support for an additional other transactions to be awarded by the Washington headquarters services.
▶ 0:26:00The executive agent program office executes from six funds including core title 3 dollars, car's act supplemental, Ukraine supplemental, inflation reduction act, Indo-Pacific security supplemental and Israel security supplemental. These funds have varying structures. For some funds, obligation and expenditures have no expiration dates. For others, there are expiration dates stated.
▶ 0:26:25The executive agent program office's diverse staff of engineers and scientists are proud to provide critical technical depth for assessing industrial-based capabilities and ensuring investments achieve a resilient defense industrial base. Notably, recent examples include a project that significantly improved production of gallium nitride monolithic microwave integrated circuits, achieving a three-fold yield improvement at a 76% cost reduction.
▶ 0:26:55Another project expanded domestic nickel production, identifying the purest nickel in the United States and perhaps globally. The purity was so good, examples were placed in the Smithsonian just last week. Our expertise extends to managing pro projects across critical chemicals, critical minerals and materials, hypersonics, radiation hardened micro electronics, castings and forgings, and energy storage and battery value chains.
▶ 0:27:24The executive agent program office employs over 60 government civilians and contractors to support the program in full-time and part-time positions. Executive agent program office personnel benefit from a strategic understanding of their technical fields that extends to science and technology pro projects they support outside of the title 3 This enables our team to initiate materials and manufacturing technology programs of great value to the Department
▶ 0:27:54of Defense. The materials and manufacturing directorate through the executive agent program office takes pride in our 33 years securing the defense industrial base for our nation. I thank you for the opportunity to testify today and I look forward to your
▶ 0:28:10Thank you Dr. Ormsby. Um we'll now turn number of questions and so um I'll recognize myself for five minutes. Um you know Mr. Frankston you highlighted really the three uh titles that are functional and you look just by structure title one title three and title 7 that I'll tell you it's gone some undergone some revisions. Um so for the most part it's been deletions and not additions uh over the years.
▶ 0:28:39Um but you know title title one uh for simplicity prioritization, title three uh for investments and title uh seven for screening. I I wonder if you could highlight particularly an example maybe a cost share example of how you're deploying capital to address a DPA priority for the supply chain and how that works. Uh you know how do you screen for it? How do you decide to make the investment? What does that work? How does that work out?
▶ 0:29:10You highlighted 88 million that you're deploying in the market, maybe one of those projects that is addressing a critical shortage.
▶ 0:29:18Sir, thank you very much for the question. Um, the DPA gives us flexibilities to attack a number of different uh key priority areas. Um, one of those uh that we have been focusing on intently of late is critical and strategic uh minerals and materials. given some of the supply chain challenges that have been highlighted due to Chinese export restrictions and controls. Um we have recently put out a couple of uh projects just uh in the last few weeks.
▶ 0:29:46Uh but previously to those we have a number of uh projects where we give just a little bit of dollars with DPA and that comes to a cost share either from a private equity or venture capital uh for those projects.
▶ 0:30:01A lot of times we are just giving a signaling to the company to show that we have a sustained interest in this priority capability or mineral in this particular case and that is what these companies are needing for their own investments or to get outside banking help and support to sustain their uh their critical mineral
▶ 0:30:18Yeah, thank you for that. And you highlight critical minerals and obviously that's a a shortage for the country. It's a crisis not just for the defense supply chain but maybe more broadly and given that this is the first time we're updating DPA postco maybe you could talk about some of the other areas that you look at in terms of prioritization or uh investment um in you know healthcare pharmaceuticals other sectors that that maybe are on your radar screen.
▶ 0:30:47So thank you. Um our current priorities are uh critical minerals uh missiles and munitions are at the top of our list. Uh there are many other sectors where we have uh critical shortfalls in our indust defense industrial base. Uh minerals and and materials are at the basis and the fundamental nature of everything that we do.
▶ 0:31:07If we do not have a particular mineral, um it doesn't matter if we have 95% of all the other ones for a particular weapon system, we're still short because of that requirement. And so that has our direct key focus and attention. Missiles and munitions are our direct way to project force and enable capability. And so we have challenges uh be to meet the needs that our nation demands for the conflicts and the adversaries that uh we may face.
▶ 0:31:34And so we are deploying our capital, deploying DPA to get after key shortfalls to expand capacity ahead of a conflict uh so that we are not uh short once the uh balloon goes up.
▶ 0:31:45Yeah, thank you. I mean, you know, it's an adaptation of a different quote, but you know, you you go to supply go to war with the supply chain you have, not the one you wish you had, right? And uh you know, Dr. Dr. Armsby, you've highlighted both cutting edge technology and then, you know, more mature technologies like castings and forgings, and I wonder if you could highlight in your work how you balance those needs to really meet uh, you know, the national security threats that that we need to address.
▶ 0:32:13Yes, sir. Thank you for the the question. Um, I would say that first off, it is absolutely a partnership with Mr. Frankston. Uh, he sets the priorities, we execute the programs. uh so he sets the the balance of the portfolio.
▶ 0:32:27Uh but we do have a number of of projects in the the last several years that have focused on castings and forgings uh for Navy applications, for air force applications um as as well as I I said you know balance across micro electronics needs, hypersonics needs, you name it. uh really set by the the priorities coming out of OSD and then we go out and work with the industry partners uh to actually execute the programs.
▶ 0:32:55Yeah, thank you. And um not only is is right Pat central to uh the capability to run procurement and the materials command, the cutting edge procurement at AFRL, you also have uh capability at at threat assessment. And so uh it was nice to bring some colleagues in and highlight the capabilities here at Right Pad. So again, thanks to the team for hosting. Uh I'll yield my time and now recognize uh Chairman Hill. Uh Mr.
▶ 0:33:22French Hill is the chairman of the full committee and represents uh an area of Little Rock, Arkansas. Uh thanks for both of you being with us today and greetings from Little Rock Air Force Base and the 19th Airwing in Little Rock to everybody here at Right Pat. Um Mr. Frankson, let me start with you. Looking at title one, just on the priority setting, I'm a business guy, so I'm going to ask a pretty obvious question, which is if everything gets a priority rating, what's a priority?
▶ 0:33:51It's a great question, sir. Thank you very much uh for the opportunity to answer. So, we spend a lot of time working with the services, hearing from industry about uh the prioritization uh uh matrix. All DoD orders are generally given a higher priority just to compete against civilian markets to ensure that we get the weapons and the capabilities that we need. But we work daily with our services and our industry counterparts to be responsive when an issue is raised, when there's a conflict uh on a particular prioritization.
▶ 0:34:22Uh that in and of itself, giving it a priority rating doesn't solve the issue. uh if uh there's still a challenge in the supply chain itself, that's where DPA, Title 3 and the other uh authorities that we have to go resource that supply chain come in, but we will flag it and raise it for attention and these have our highest priority to be responsive when a bottleneck is raised.
▶ 0:34:41Does that mean that you really have a super priority system that should we should the DPA processed should the U advisory council for example you you you know set DoD priorities but you have a different grade that's a step above that when there's a bottleneck and it's a DPA priority and make that distinction so that instead of 2.5 million uh priorities over the last five years that they're you know fewer that are directly related to the specific
▶ 0:35:12benefits of title three for example.
▶ 0:35:14Uh sir there's two ways we approach this. Um so one is we have something called the DX rating. It does not actually stand for anything but that is our highest priority uh systems
▶ 0:35:24and so there's a handful of those cuz uh to your point there is only so many silver bullets you could spend from a prioritization but these are given to our uh most sensitive critical uh urgent capabilities and so they do have a little bit of a step above the rest. Alternatively, we also have within title one something called special priorities uh allocations where we work down at the lower component level.
▶ 0:35:47So where we find that there's a bottleneck or a key uh widget or item that is um a choke point in supporting multiple programs we can work to prioritize that work with the services work with industry and then if necessary given a capacity shortfall or other challenge we then would deploy DPA title three to help. So in title title three if you look back over the past five years has been very active. What's the civil service and contractor breakdown in your chain of command?
▶ 0:36:16So we have a very small but a highly skilled and empowered team. Um I only have a handful of people on our side and it's uh similar I would think with uh with the air with AFL. Um I have one DPA title three manager. Um I have a couple other civilians that are assisting. I have one deep pass. So, our prioritization manager, we have several uh billets that we're trying to fill.
▶ 0:36:39And then we have uh a handful of contractors uh behind that with the support from the Congress and our uh administration leadership. We have support to expand that, but it's necessary to manage the uh breath and scope of both the program and then the challenge in front of us.
▶ 0:36:55Well, given the pressure on the supply chain from the current conflicts around the world that we you've talked about in your opening statements and then this uh existential threat to reshore or frenshore our strategic needs that are so competitive, how many additional staff do you think you need that would accelerate the application processing and how do you quantify the what is what is our right speed on application
▶ 0:37:22Thank you for the question uh chairman. uh we feel that at least two more civilians for each of the programs and prior and uh uh titles would be useful. Uh we are conscious of not becoming a large staff that uh adds bureaucracy to the process but a couple of trained skilled uh civilians. Uh luckily we have support for our leadership to move out on this.
▶ 0:37:45Um and then with some requisite contractor support but then also we rely on the partnership with our services uh like AFL but then all the other military services who are helping us evaluate assess and ensure that when we make an investment or plan to make an investment that there is a receiving end of that investment whether through an industry partner or a program office to ensure that that investment is worthwhile.
▶ 0:38:07Good. Thank you Mr. Chairman. I'll yield back and look forward to the second Thank you, Mr. Hill. I now recognize the vice chairman of the full committee, Mr. Heisinga, who represents Western
▶ 0:38:18Uh, thank you, uh, both Chairman Davidson, Chairman Hill. Uh, appreciate the opportunity to be down here. Um, I, uh, I actually represent the Battle Creek Air National Guard facility up in Battle Creek. We had a briefing earlier uh with someone from the 110th Airwing and I just want to uh say uh thank you and extend uh my gratitude to them.
▶ 0:38:42They they operate the MQ1s and nines uh out of uh out of Battle Creek and obviously that is part of the portfolio that we're we're talking about here. Um I want to try to touch on a couple of uh of things.
▶ 0:38:57uh it might seem a little disjointed but I in based on some experience that we had had um uh previously going through reworking of CPHAS uh I'd like to know more about specifically from Mr. Frankston uh how your operations fit into that CPHAS um operation and that review.
▶ 0:39:21Thank you for the question vice chairman. Um so CPHAS is managed by one of our sister offices. Uh so still within the umbrella of our industrial-based policy office uh we collaborate with them daily. Um the CPHAS reviews uh they have the lead on how they work with the department of commerce and the other uh inter agencies that review each of these um potential cases.
▶ 0:39:45But a lot of that is informed by where a uh adversary or foreign partner may want to make an investment. We need to be aware of that as we're targeting our own supply chains too. It helps us to know where China or another adversary is trying to uh gain leverage against a key shortfall that we may have or something else. So there is a constant exchange of data
▶ 0:40:06and and typically that had been
▶ 0:40:08in manufacturing space previously. Now we've sort of expanded it into strategic locations. Correct. which is which is literally the review of land and acquisitions that might be outside of either a technical ability or some sort of manufacturing ability. Correct.
▶ 0:40:24That that is correct, sir. Yes.
▶ 0:40:26Okay. And it's appropriate in your view.
▶ 0:40:28Uh yes. Uh it absolutely is a direct bearing um where our adversaries are. Uh so that land that might be next to a base or that might be next to an industrial facility uh is uh may just be an opportunity for uh espionage or a
▶ 0:40:42probably not just sheer coincidence that the Chinese are interested in picking up land next to facility. Yeah.
▶ 0:40:48Uh okay. Uh I'm going to track over to Dr. armsby here a little bit because I think this is something that as we've gone through um discussions of DPA uh kind of famously at least in Michigan there was discussion when we saw uh the uh the uh the shortfall in in ventilators for example during COVID and the supply being cut off by China there was discussion of implementing DPA to
▶ 0:41:19uh to compel our manufacturers ers to go into that specific manufacturing. Um Ford, as my recollection, actually voluntarily stepped up and changed some of their production to to be able to fulfill that. Uh but that's that's outside of sort of the traditional uh role of DPA and and certainly what uh you've been talking about with these these core six funds uh you know, the core title three dollars.
▶ 0:41:47Uh I'm more interested in how you see uh how the car's act supplemental funds, how the inflation reduction act funds fit into that. And then we see the foreign policy side of this with Ukraine supplemental, the Indopacific uh security supplemental and the Israel security uh supplemental funds. So explain to everybody that might be uh watching this and certainly for us up here where you see these different funds and how they fit and you had mentioned there's expiration dates on those. if you could outline that.
▶ 0:42:18Yes. Uh thank you for the the question, Vice Chairman. Um I I think uh a lot of that really does go to to Mr. Frankston. Uh where where we're setting the priorities within the um legal authorities that we get and the funding authorities that we get. Uh and then in our office, we we execute the the um priorities basically.
▶ 0:42:40Um so I I would say the the various funds um do apply to to needs that we have. Um you know as we look at replenishing munitions uh replenishing stocks, it it does does help. Um the expiration date uh issue that that you bring up um can be a bit of a um an execution hindrance for us to to be honest with you.
▶ 0:43:10um in that especially as we get large um dollar infusions uh coming in and um I I don't want to say unplanned but maybe not uh expected well in advance right uh with restrictions on how you can use them then we have to to fairly rapidly come up with a strategy and we have to get those funds on agreements and and issued uh which causes us to have to do some some prioritization of who we're
▶ 0:43:40working with, when we're working with them, uh, with our limited staff.
▶ 0:43:44My time's expired, but I look forward to exploring that a bit more, maybe a second round. So, yield back.
▶ 0:43:49We'll have a second round. Um, I now recognize the gentleman from North Carolina, Mr. Moore, who's also the former speaker of the House of the State of North Carolina's House of
▶ 0:44:01Thank you, Mr. Chairman, and and thank you for hosting us here. This has been an incredible visit and uh this is an absolutely amazing facility, an amazing base. I'll tell you with, you know, with the continued consolidation of our domestic industrial base, it it seems to me more important than ever to recognize and support the critical role of our existing industry. Uh like back home in North Carolina, for example, the uh uh we have a lot of companies that contribute greatly to the, you know, supply chain when it comes to national defense.
▶ 0:44:31uh in Shelby, which is actually my home county, we actually have one of the very few uh copper smelting and refining facilities in the United States. Uh there's talk about the availability of of, you know, rare earth minerals, but you also have to have the capability to uh to produce those. And so they actually have a facility that produces 100% of copper, pure copper from copper scrap. And the Department of Defense, of course, has identified high purity copper as a strategic metal essential to our national security. So Dr.
▶ 0:44:59Wormsby with copper being DoD's second most utilized material uh which China though currently controls as I understand 50% of the global smelting capacity. What are the national security consequences when our domestic smelting and refining capabilities lack behind those of our global competitors?
▶ 0:45:20Sir, thank you for the question. Um I I think you're you're hitting on the the critical issue uh honestly that that Mr. Frankston brought up early on about the priority for critical chemicals, critical minerals, critical materials. Uh we are seeing a number of uh issues exactly like the one that that you bring up in our supply chains.
▶ 0:45:43um particularly down uh very far into the supply chains, often at uh levels below where our our prime contractors would even recognize that there is an issue that they can't get that specific material that is necessary uh for our weapon systems. And that's where the the priority on the critical uh chemicals, minerals, materials uh really plays into our our strategy here and and where we're investing.
▶ 0:46:12uh because it is a big issue for the department.
▶ 0:46:14So how would you say you know export restrictions by other nations affect the ability to refine and produce copper in the US?
▶ 0:46:24Sir, it's it's obviously a major issue for us. Um and to to the point um it's not just about getting the materials that that we need, it's also about being able to process them, right? And that's that's why we have uh such a priority on this investment. So, so let's say if another nation were to manipulate global prices, what actions could the DoD take to safeguard uh domestic manufacturing?
▶ 0:46:52Uh sir, thank you for the question. Would you like to take it or would you like me to answer, sir?
▶ 0:46:57So, uh thank you very much. I'd happy to uh help. So, as uh Dr. Ormsby noted, uh it's not just at the mine itself. It's not just at the processing itself. across the entire supply chain for our critical uh minerals and materials and China has absolutely been uh manipulating the market has been placing export controls and so that is one of the reasons why we've placed such a high priority. It's why one of the earliest executive orders from this administration was on critical minerals.
▶ 0:47:24It's why uh we have a presidential determination waiver to be able to use DPA for critical minerals and materials across the entire supply chain so that we can rebuild or reinforce our domestic capability and capacity or in the case of uh so for uh for the mines itself and where these minerals are coming out of the earth uh geography matters and some of this isn't just always not available in the US and so that's why it's leveraging key partners and allies that we can utilize uh certainly at the mine
▶ 0:47:54level but then build the processing and the supply chain uh capabilities internal to the US
▶ 0:47:59and and to that point even beyond metals I think it's equally important that we be able to identify for example and be able to source textiles you know that you don't think of textiles a lot of time when you're just talking about national defense but the ability to have the proper uniforms the proper material uh for our fighting men and women is critical and of course the Barry amendment requires the DoD to procure textile and clothing products made with nearly 100% US content and ensures a stable domestic supply chain
▶ 0:48:29that will protect us from from other nations that seek to manipulate it. So I guess it's kind of a softball question here, but how does maintaining how important is maintaining an independent domestic textile supply chain improve the resil resiliency in the event of a nearpeer conflict? And either of you want to take
▶ 0:48:47Uh thank you for the question. It's absolutely critical. Uh it's not just in clothing. those textiles and materials go into our weapon systems themselves, too. So, we need to have that domestic
▶ 0:48:58We're and we're very proud in North Carolina to have a a significant uh production capacity of textiles. So,
▶ 0:49:06I won't start the fight about being the home of flight since we're in Ohio right now. But, uh
▶ 0:49:11we do have some textiles, but
▶ 0:49:13I thank the gentleman. We'll go ahead and start our second panel now. And so, I'll I'll rec second round, not the second panel. second round for this panel uh to to be more precise. Uh so recognize myself for five minutes. And um talking about flight, you know, they do have some beautiful real estate in North Carolina. Um but we do have the engineers uh here in Ohio. So
▶ 0:49:36I knew it was going to go there, but I did start it. So
▶ 0:49:40is here in the in the birthplace of aviation. Um now the uh the dialogue that with um Mr. Heisinga really I think highlights you know the coordination necessary across multiple federal agencies and of course on on seven article 7 or title 7 um when you're looking at CPHAS for example um threat assessments things like that it's important in title one I think chairman Hill highlighted that you know if
▶ 0:50:10you've got 100 priorities you really have zero priorities um but as picking up with the dialogue with Mr. forms, how's the collaboration across agencies going within title three? And when you think about multiple federal agencies, there are times where FEMA is really the lead coordinator. So, what's uh what's the overall office doing uh to kind of coordinate uh kind of across agencies?
▶ 0:50:33Mr. Mr. Frankson.
▶ 0:50:34All right. Thank you very much for the uh question. So, um there is a monthly working group that uh FEMA hosts uh for all of the uh federal agencies that has DPA authorities. Um, DoD happens to have the vast majority of actual DoD appropriation or appropriation for DPA.
▶ 0:50:53Um, but we work uh handinand uh with our partners uh when we have um uh challenges or areas that uh occur or incidents that occur that cross into one of our other inter agency partners. We have a fantastic working relationship where we can reach out to someone like energy or transportation to identify opportunities to collaborate. Um this can be strengthened. we could work uh at an even higher level at the executive level more collaboratively but again we work across the inter agency.
▶ 0:51:22I will add in particular on DPA title one uh commerce uh has the lead role and uh we have a phenomenal working relationship with commerce when we get a prioritization when we need their help and request we turn that quick ourselves and they're turning it back to even quicker to us. So it is a really really uh strong relationship.
▶ 0:51:42Yeah. Thank you. you and I guess it also highlights the importance of how Congress appropriates money and you know Dr. Orsby you highlighted several buckets that you're actively managing when you think about um not just the appropriations and the status quo that we have not just in DPA but in the procurement one of the things that DPA does at times is u you know sort of bridge the gap between status quo thinking and a lot of times the the supply chain uh functions at least adequately for the status quo.
▶ 0:52:12The real question is when you have those moments of crisis where you have to surge, how resilient is the supply chain, how important is it to maybe use some of what we're learning from DPA to look at the rest of the procurement process or be able to wave even our own procurement process? And I think just to illustrate, uh, you know, SpaceX out there, you know, gave us deep space uh, launch capability that we were for a while dependent on Russia. You know, Atlas is still under development using status quo traditional procurement operations.
▶ 0:52:40So at a at a certain level, the supply chain arbitrage was really part of the success story there. So, you know, how do we uh how do we make this better?
▶ 0:52:49Yes, Chairman Davidson, thank you for the question. Um I I I think you're hitting on a a key issue that that we have right now. Um these authorities can can really help us to um address supply chain issues, but I I believe Mr.
▶ 0:53:06Frankston said earlier what we really need to get to and to your point earlier if you go to war with the supply chain you have we need to be more proactive and looking forward right um because we've already identified a number of strategic um problems in our supply chain where where we need to address those issues these authorities have been very helpful to us in doing that I think they're just part of the puzzle to be honest with you um there are a number of other tools that that we have
▶ 0:53:36also from our our science and technology portfolios to other investment opportunities. Um but I I believe we need a whole of nation approach honestly that looks at everything that we have um to be able to start to proactively prepare for a surge. what we saw during COVID um as as the the fund um jumped up significantly in importance and uh number of projects uh number of dollars in invested etc.
▶ 0:54:06Um we mobilized very quickly. It was an all hands-on deck kind of effort. Um, and we have a number of of lessons learned in in how we've organized now that we've continued um to to try to be more effective and efficient uh in in identifying issues and setting priorities. Uh but I I believe we have to keep that going into the future.
▶ 0:54:28Yeah. Thank you both. Um I now my time's expired and I now recognize the uh chairman Hill for five minutes.
▶ 0:54:35Well, Mr. Davidson, thank you. And I I do recognize that Ohio is the birthplace of aviation, but the actual aviation took place in North Carolina at Kittyhawk, I think. And and the University of Michigan's aeronautical engineering program was started by people who were connected with the rights. So all all the states here, we're all in goodstead by being here at the birthplace of aviation. Mr. Frankston, um current industrial base, does it have surge capacity?
▶ 0:55:05Where are we the weakest in our defense industrial base? Going back to my earlier point that we have wars underway with supply chain constraints and we have strategic supply string supply constraints. So what down at the Pentagon? What's worries you the most about surge capacity?
▶ 0:55:26Um thank you for the question sir. Uh I'm a naval historian and analyst by uh education and trade and I Navy capacity, ship building and ship repair capacity. Uh we made some very um interesting decisions as from the peace dividend in the at the end of the cold war and we have a much reduced capacity for ship repair and ship construction.
▶ 0:55:50Uh and this has been a priority of this administration through the maritime dominance EO uh and other uh critical areas that our office is supporting. Uh as Dr. Ormsby mentioned, there's been a number of investments in castings and forgings. uh we have uh workforce uh training programs to expand uh because that is something I'll I'll also emphasize for as much as we have the actual facilities and the equipment challenges and we need to expand capacity we need the people that need to be hired and retained uh in these industries and
▶ 0:56:21uh have good high-paying quality high-skilled jobs and be there when we need to surge
▶ 0:56:27proud to be on a very very cold winter day at Newport News last year to see the USS Arkansas Chrysen, our newest fast attack sub. Proud to have her name back on a ship in the fleet. Uh Dr. Ornsby, uh Title Three grants um as someone responsible for executing that big picture strategy.
▶ 0:56:51Do you receive feedback from businesses about how well mass production is working under Title 3? Just a practical feedback Uh yes, Chairman Hill. Uh thank you for the question.
▶ 0:57:04We we do um what what we really get uh from from industry a lot uh because they do recognize that that we execute a lot of the projects um is those uh white papers and those recommendations of places where they see need for investment uh where they are having issues in their supply chains. um and we facilitate them uh getting in touch with Mr.
▶ 0:57:31Frankston's office um to to actually make proposals um either through the other transactions or through our uh open uh funding opportunity announcement.
▶ 0:57:43That's good. Um how does the research labs manec program sort of bridge the gap uh between early stage innovation and scalable industrial capacity? I I see this is a constant complaint in Congress is breaking into the supply chain, which the president's taking action on, which I'm fully supportive of, but once in the supply chain, if you're an early stage development company, how you can scale up. Tell me about your bridging there.
▶ 0:58:14Yes, sir. Um, thank you for that question. that that's a a nice tie between our science and technology investments which are a different um that that I also control um where where we can um invest with our industrial-based partners to develop manufacturing processes um to either get uh faster production, lower cost or to develop a domestic
▶ 0:58:44source for production. if one doesn't exist. Four things in my case that are important to the department of the air force space and air force.
▶ 0:58:52Um there is a a man techch program in every service so that you know you can can take the cookie cutter to the other
▶ 0:58:59Um once we can can develop that initial manufacturing process then frequently we see a need to now scale it. Um, and that's where the the title 3 authorities really come to play and and help to uh now get you to the full scale that we
▶ 0:59:16And you think those are working effectively? Is there one thing if you could change one thing, what would it
▶ 0:59:21I believe those are working effectively. Yes. Um I I could give you a couple of anecdotal examples uh where I see them working if if you would like, but I don't want to take your time. Okay.
▶ 0:59:32Good. Thank you. That'd be helpful. I yield back, Mr. Chairman.
▶ 0:59:34Uh thank you, Mr. Hill. And now recognize the vice chairman, Mr. Heisinga for 5 minutes.
▶ 0:59:39Thank you, Mr. Chairman. Um, so let's go back and unpack the uh the the six sort of funds that we have and and we have title three, which I think is Uh we then have what I would say maybe are conflict related uh supplementals uh Indoacific, Israel, and Ukraine. And then we have I'm not sure quite what category to put this in. CAR's act and the IRA. Um so Dr.
▶ 1:00:10Ormsby had said there were some lessons learned from COVID. Uh we can get into those but I really want to know you know what what do each one of those various uh buckets of funding what do they cover? What are they being used
▶ 1:00:27Uh thank you for the question. So, we have uh a number of different uh similar but uh uh but uh different uh funding priorities within each of those uh uh buckets of of money. and the Ukraine and Israel supplementals, much of that went towards our missiles and miss and munitions productions where we found that when we tried to surge some of the key uh weapon systems that were supporting and providing uh in support of those conflicts, the dollars went to those whether
▶ 1:00:57through solid rocket motors or castings and forgings um
▶ 1:01:01to expand capacity.
▶ 1:01:03Yes, sir.
▶ 1:01:03Okay. Um but generally uh to expand capacity just when we knew that we weren't able to ramp as much as we needed to based on the numbers that we needed for our own needs and then what we were providing overseas.
▶ 1:01:15How about Indo Pacific?
▶ 1:01:16Uh same thing. So it's some different munitions, different types but generally the same areas. We have shortfalls across munitions which is where each of those funds we're targeting.
▶ 1:01:25Okay. How how about uh CARES and IRA? What was that money used for?
▶ 1:01:30Uh CARES and so this was before my time I understand. uh uh uh uh but a lot of it went towards
▶ 1:01:36and not all of us up here supported necessarily all those expansions. So I'm just trying to figure out as you know what the expiration dates might be on that. Is there a need to be continuing parts or or those those programs at all?
▶ 1:01:49I'd be happy to get you some additional details for the record on the specifics on uh the timeline for the rest of the money and the expirations and where where it's going to. Sir,
▶ 1:01:57okay. Do you have any examples of what CARES or IRA was used for?
▶ 1:02:01Sure. So some of it went to ventilators, some of it went to um uh needles, syringes, uh protective equipments, uh a lot of just medical
▶ 1:02:10basically where we were seeing a shortfall in supply chain.
▶ 1:02:12Yes, sir.
▶ 1:02:13Okay. Uh title three I think was self-explanatory. Um the I want to touch on this remaining little couple of minutes here on chips and production. Uh obviously as you were saying uh you know the critical minerals and then the missiles and munitions uh were sort of the focus. You don't have missiles and munitions if you don't have chips. Uh you don't have chips unless you have critical minerals.
▶ 1:02:39Uh so explain to me what uh how that might factor into uh into what we're doing here.
▶ 1:02:48Thank you for the question. micro electronics and chips are uh essential to just about every weapon system that that we have and make and so there has been a number of investments uh within DPA but then as Dr. Dr. Ormsy was mentioning in some of the other funds that are out there and then some of the service investment themselves have made in this there's been several programs that uh were being uh used to resource um both uh large scale chip production and then some of the more niche uh uh microchips uh for some of the more exquisite weapon systems
▶ 1:03:18and some of the more exquisite capabilities that we have. Uh there's still a lot of work to go uh so that we can continue to on
▶ 1:03:24because we're not there yet, right? and our production capability. I mean, that that was part of the these these various
▶ 1:03:30uh previous buckets that we were talking about. We were talking about shortfall because we'd sent off a lot of our our weapon systems, but then it also seems that we have we have some gaps that need to get filled. Correct. And and is DPA trying to fill those specifically when it comes to chips? Chips production visav what um what we see production here in the United States versus what what is produced overseas?
▶ 1:03:55Yes, sir. and and it ranges across uh the supply chain too just because whether it's the the actual uh foundry or the the production of the wafer itself or the mineral as you mentioned that goes into it we need to secure both the supply not just of the uh raw material but the processing um much of which went to China over the last 30 years and so is a concerted effort to bring back not just the material the mineral itself but where that chip is being manufactured in all aspects of it supply chain
▶ 1:04:24and finally you are part of any CPHAS review of that. Correct.
▶ 1:04:27I am not personally part of
▶ 1:04:29but but but CPHAS is part of that
▶ 1:04:32Okay. And I'll maybe reserve my question about uh where we are currently on CPHAS review the H20s and other chip capabilities and and uh some recent announcements as to um where those are being shipped. Time's expired, but we'll we'll continue this later. Thank you. Yield back.
▶ 1:04:50Thank you. Um Mr. Moore from North Carolina is now recognized for five minutes. Thank you, Mr. Chairman. I I wanted to follow with Mr. Frankson about the discussion about the ship building. One of uh one of our colleagues, Representative Jen Keegan from Virginia, was one of the members that frankly brought me up to speed on the fact of how far behind we are, particularly China, in terms of the production of ships uh between the two nations. And what what is the administration looking at to ramp that up?
▶ 1:05:19like what is the what is the shortterm plan and what is the long-term plan to to facilitate
▶ 1:05:25Uh I I appreciate the question on ship building. This is area of deep concern and passion to me. Uh the maritime dominance uh EO I don't recall the date that it came out was one of the longest ones uh ever written due to the due to where we are on ship building and the state of ship building.
▶ 1:05:41Uh so it's looking across the board uh at both not just for defense requirements then also on the commercial side there is uh weekly uh meetings across each of the aspects of that uh executive order working for commercial ship building working for uh US uh military ship building the military seal lift command uh the maritime administration through uh the department of transportation all of that is is critical because it's the same limited industrial base supporting
▶ 1:06:11each of those uh components. Uh so that when we work together to go target um a pump or a valve manufacturer, it doesn't matter uh if that's going to be at a company that's uh supporting a commercial vendor right now, that valve or or or pump that's so far down the supply chain could easily be turned to build capacity for US ship building.
▶ 1:06:32So there is a number of different efforts both within our um presidential budget and what we build in our Turo process looking to expand our ship building capability capacity uh because this administration recognizes that we have a particular challenge to match uh what China has ramped up their own capacity. So in terms of what Congress can do, obviously money in terms of appropriations, but are there other in addition to that, are there regulatory matters, are there other things that Congress can do that could help facilitate this process?
▶ 1:07:03I'd be happy to get back a formal response for the record on some of those recommendations, sir.
▶ 1:07:07All right. And then in terms Mr. Heisenga asked you a question, I think along similar on the same lines, but but the question had to do with IRA and and CARES. Have you been able to go through and look at some of the procurement and find some areas where funds can be repurposed? Perhaps funds are going areas that are not as um critical. Were you able to repurpose that in some of the other areas that where we do see some shortfall at least in an immediate um in the immediate time frame?
▶ 1:07:36Uh we continue to look for opportunities on where our funding has been aligned whether from a previous priority that may have changed based on uh real world events. uh we are always looking at our portfolio to support not just where um we see things but where our leadership is directing us. So we have some very strong internal guidance from our uh department of defense leadership on their key priorities. So critical minerals and missiles and munitions are uh two at the top.
▶ 1:08:02And so we are looking across our resourcing areas because again you cannot build a uh a missile, a fighter plane, a jet, a tank, a ship if you don't have the raw materials, the raw minerals, nor do if you have the weapons to actually use from that
▶ 1:08:18Right. And Dr. Ormsu, would you like to respond to that same question as well?
▶ 1:08:21Uh yes, sir. Thank you. I appreciate the question. Um I would simply add um not only re-evaluating the priorities and uh continually looking at the portfolio but then there are also times when for various reasons uh we start down a path of making an award and uh in the end the company uh doesn't agree to the the terms they change their business strategy our priorities change what have you um and then that gives us another opportunity
▶ 1:08:51as well to then re redeploy deploy those funds for a different
▶ 1:08:56What what I would ask is that as you as you supply further response as appropriate, provide advice for Congress in terms of ways to streamline the process or to improve efficiencies. One thing this Congress has worked very very hard on as well as the administration is improving government efficiency, getting rid of waste, getting rid just trying to cut through the bureaucracy.
▶ 1:09:18If there are things that would require congressional action that would that would I don't know get rid of some of the shackles that are that are slowing the ability to be more nimble and respond particularly as other nations take very rapid actions. Uh please let us know that because I I I'm certainly interested. I think probably most of my colleagues are as well. With that I yel back. Mr. Uh I think our witnesses uh really appreciate your testimony today and we'll pause uh for a bit as we switch to our second panel.
▶ 1:09:48Thank you very much.
▶ 1:09:50Thank you very much.
▶ 1:09:52Thank you.
▶ 1:16:45institutions will come to order. I'd like to thank our uh thanks again to our first panel of witnesses. And so now I'd like to welcome our second panel of witnesses. Um first, Mr. Robert Faxton is the chairman of the board at Consolidated Boring, Inc. and Mr. Gordon Fallen is the chief product officer at Beehive Industries. Uh we thank you both for taking time to be here and you'll each be recognized for five minutes to give an oral presentation of your testimony.
▶ 1:17:12Without objection, your written statements will be made part of the record. Mr. Faxon, you're now recognized for five minutes for your oral statement.
▶ 1:17:21Thank you, Chairman Hill, Chairman Davidson, and members of the subcommittee. Thank you for the opportunity to testify today. My name is Robert Fax and chairman of the board for Consolidated Boing Incorporated, a company formed in 2021 from the acquisition of Fax and Machining in Cincinnati, Ohio and a division of ATI now called American Flow Form Machining in Bill Rick, Massachusetts. These two companies represent almost 100 years of combined manufacturing.
▶ 1:17:43My testimony represents the most accurate and truthful representation of the current situation that I can offer based on my personal interactions with both government and industry and is totally of my own opinion and may or may not represent the balance of the CVI team. I bring over 47 years of hands-on manufacturing experience including over 25 years specifically in the defense industry starting at the age of 13 working part-time in family business in Cincinnati.
▶ 1:18:06Fax and Machining located in Cincinnati, Ohio operates 185,000 square foot facility manufacturing warheads and precision components for critical defense programs such as the GBU57 massive ordinance penetrator which reproduced seven of the 14 30,000lb bunker buster bombs used in the Iranian nuclear uh facility strike. blue 137 200lb bunker busters.
▶ 1:18:27The GMLS unitary warhead fax and machining played a key role in the blue 136 next generation area attack weapon program from concept and development all the way through full rate production as a prime contractor for the US Air Force. Company's also advancing modernization efforts in artillery production with plans for state-of-the-art facility capable of vertically integrated manufacturing producing up to 450,000 modular artillery shells annually to support evolving military requirements.
▶ 1:18:51Fax machine supports major defense contractors including General Dynamics, ARRA, Lockheed Martin, Northrup Grumman, US government and many others. American Flow Form Machining based in Bill, Massachusetts operates a 65,000 foot facility focused on manufacturer of large diameter steel rocket motor cases, many smaller rocket motor cases. Over 1 million rocket motor cases have been produced in this facility since its inception. AFM supplies parts for missile systems including stage 1 MK72 rocket motor case for the SM3 and SM6 missiles.
▶ 1:19:20Stinger tow rocket motors and is launching production of rocket motor cases for system like the ground launch SDB1 for Android. FM also has been contacted to produce MK 104 and GMT Patriot rocket motor cases. Additionally, FM supports programs such as Zouri MK22 mine clearing systems just to name a few. We're actively engaged in innovative companies to support projects like Golden Dome and Iron Dome. National security defense industrialbased challenges.
▶ 1:19:44The demand for large steel rocket motors, especially those 13 inches and larger in diameter, is growing rapidly due to today's evolving geopolitical environment. For example, the combined demand for the MK72, MK 104, and GMT Patriot cases is approximately 3,000 units annually, far exceeding current AFM capacity of 350 to 400 large rocket motor cases. AFM is uniquely positioned to address this shortage with the proposed vertically integrated rocket motor case factory capable of producing 3,000 cases per year.
▶ 1:20:10The facility will strengthen supply chain resilience by internalizing all manufacturing process and steps reducing dependence on external suppliers and support surge capacity during times of crisis. New factory would create roughly 300 skilled manufacturing jobs in Massachusetts that generate significant cost savings for the government. Additionally, this factory would play a key role in supporting current and future defense programs, including the administration's proposed Golden Dome initiative. Experience with Title 3 funding and recommendations.
▶ 1:20:35AFM has worked closely with the defense production act title three office during its efforts to secure funding for this factory expansion and has submitted a title three funding request for a new facility. While the potential impact is significant process from application to award has proven lengthy and complex which can be discouraging for smaller companies to pursue these opportunities. This delay risk leaving critical defense manufacturing capacity unmet amid urgent national security needs.
▶ 1:20:58To address this, I recommend multi-year predictable funding and streamlined application process to reduce uncertainty and incentivize timely project starts. If industry is being asked to move at the speed of war, then our partners being the US government will also have to move at the speed of war. While the primary focus of this funding is the defense industrial base, it's equally important to support and strengthen the broader industrial base, including commercial and non DoD manufacturers, so that these companies remain financially viable in the marketplace and can rapidly pivot to defense production if needed.
▶ 1:21:26This approach not only enhances national security but also promotes reshoring supports high-skilled jobs and ensures a more resilient competitive manufacturing ecosystem overall. Conclusion. The investment reforms I've described are vital to securing our nation's defense industrial-based manufacturing future.
▶ 1:21:41With the right support, consolidating work incorporated through its operating companies, Fax and Machine, AFM stands ready to deliver the critical capabilities our military requires and respectfully request that the title 3 submission already accepted but not yet funded be funded not only for the original mount but also for the additional amount necessary to meet current demands. This is not only important for our company but the entire defense industrial base. These efforts can take years to complete under normal circumstances. Several of the key pieces of equipment necessary for the rocket motor factory will need to be manufactured from the ground up.
▶ 1:22:10Designed, built, tested, runoff, and installed. In some cases, will take well over two years to complete before additional production can begin. If anything were to occur that impedes a normal operating environment, these timelines could stretch even further, potentially delaying completion by several years. The stakes are too high to risk such delays. Failure to act now could leave the United States without sufficient rocket motor production capacity to sustain a prolonged high-intensity conflict, placing both our national security and our war fighters at unacceptable risk. Act now and be responsible.
▶ 1:22:39We must act now to be responsible stewards in meeting the known and immediate needs our military leaders have clearly challenged us with in order in order to properly support our war fighters and our allies. Thank you for your time. I look forward to your questions.
▶ 1:22:50Thank you, Mr. Faxton. Um Mr. Mr. for following. You're now recognized for five minutes for your oral remarks.
▶ 1:22:57All right. Thank you, uh, Chairman Davidson, Chairman Hill, and distinguished members of the committee, including Representatives Heisenga and Moore. Uh, I appreciate the opportunity to speak with you today on the critical role that the Defense Production Act has in strengthening our nation's defense. Uh, I'm Gordy Faw and I'm the chief product officer of Beehive Industries. Uh, at Beehive, uh, we're a US-based manufacturing company with over 300 employees at locations in Denver, Knoxville, and also in Cincinnati.
▶ 1:23:22In fact, we just uh opened an expanded facility down in Leland about 30 mi south of here last week. So, it's great to be with you today. Um, we specialize in additive manufacturing of jet engines for uncrrewed weapon systems, counter UAS platforms, and drones. Uh, Beehive's mission is powering American defense, and we're all in on helping the US and allied weapons uh US and allied nations replenish their weapon stockpiles, which have been depleted over the last decades by global conflicts.
▶ 1:23:51Um, let me provide just a little example to put this challenge in context. Um, every month Russia bombards Ukraine with over 700 drones launched in swarms of hundreds at a time, wreaking havoc across the country. The Ukraine to defend itself relies on advanced missile defense systems like the Iron Dome and the Patriot systems provided by the US and its allies. These systems work great, but there's two big problems. Uh, first of all, the Russian drones come from Iran.
▶ 1:24:18They cost about $50,000 a piece and they can make 6,000 plus a year. The projectiles used in the Ukraine systems to shoot them down cost between one and $4 million a piece. And right now we can only make about 2,000 a year. So problem one is uh it currently costs the Ukraine about 50 times more to defend itself than it costs Russia to attack it.
▶ 1:24:41That's the opposite of Problem number two is even if Ukraine could afford it, Russia's able to send three times more things at it than they can shoot down. Right? So they're definitely disadvantaged in this conflict. And this is just one example. Uh future examples could include in the notsodistant future a US conflict with China which would face a similar challenge. Um and traditional manufacturing processes can't solve these problems.
▶ 1:25:06Uh the Department of Defense estimates that to rebuild stockpiles with existing systems would take more than 13 years and $430 billion, which is time and money we just don't have. But additive manufacturing uh can help solve that challenge. By designing engines in a new way to fully leverage the potential of additive, we see engines that are 25 more% more efficient, less than half the cost. They can be developed, tested, and fielded in one quarter of the time.
▶ 1:25:33They can be scaled up to produce more than 10,000 engines a year in less than three years at less than 20% of the cost of scaling conventional supply chains. And by printing jet engines domestically from raw powder, we eliminate the risk of foreign source components disrupting supply of these critical systems. The Defense Production Act and especially Title 3 is essential in making this possible. Without it, scaling complex capital inensive manufacturing processes like ours is extremely risky.
▶ 1:26:02Uh, Beehive has benefited or will benefit in four ways from DPA title 3. First of all, it allows us to uh respond rapidly to new threats. The traditional acquisition process can take three plus years to go from a good idea that we know we need to do to actually starting. With DPA, you can start in less than a year. So, it's a great tool for that. Um, it also provides preemptive investment, which allows us to invest in developing new products and scaling production capacity ahead of demand.
▶ 1:26:31Like you said, if you when you go to war, you go to war with the supply chain you have, not the supply chain you want. It gives you a way to build that supply chain in advance. It also creates capital security for companies like ours that are privately funded um by extending our financial runway and also it signals DoD commitment which encourages future private investment. That's really key for companies like ours. It also secures access to critical materials like high temperature metals which behive relies on to make its products.
▶ 1:26:57To maximize the benefit and effectiveness of title 3 uh beehive, we have four recommendations for the committee. Um one, preserve and clarify title 3 authority to support innovation that delivers capability at scale, also called prototype to production transitions. This is how we get capabilities to the field faster with lower cost and risk. Our second recommendation is tailor title 3 programs for agile advanced manufacturers.
▶ 1:27:22make it more accessible to non-traditional defense companies by streamlining contracts through OTAAS, adjusting cost share requirements, uh things like that. Recommendation three is continue to strengthen domestic supply chains for high temperature alloys, nickel, super alloys, and titanium. I think we've talked about that quite a bit today. Uh good progress just need to continue. Uh those inputs are vulnerable to geopolitical risk yet essential to products like propulsion.
▶ 1:27:48And the final recommendation, align title 3 efforts with allied industrial-based initiatives, especially NATO and AUS. One great thing about additive manufacturing is it allows flexible distributed manufacturing, but it can only happen if there's standardization and coordination across So in summary, the Defense Production Act is the government's most important tool for rapidly responding to defense needs in times of crisis to protect our country and secure our future.
▶ 1:28:14Uh, Beehive urges the committee to act decisively in reauthorizing and modernizing this essential law. Beehive industry stands ready to partner with the Department of Defense, our allies, and this committee to confront these new challenges and ensure our war fighters have the tools and technologies they need when they need them. Thank you and I welcome your questions.
▶ 1:28:31Uh, thank you both. So, we'll now turn to member questions. I recognize myself for five minutes. Uh, you both highlighted uh the need to surge and surge capacity and you know, Mr. facts and you you've certainly been part of that supply chain over the last few years as we've searched things to various areas, Ukraine in particular with munitions.
▶ 1:28:52Um I wonder if you could highlight how you could use uh capabilities that are in DPA um to possibly refine and provide a bridge for capabilities with the the existing kind of status quo um acquisition program. So if you look at arsenals or other programs, how do you use the private sector to provide surge capacity and how can DPA help us do
▶ 1:29:18That's a good question. Thank you. Um, one of the concepts that we had is it really if you look at the defense industrial base, it was undermined by the commercial industrial base. All of our factories that made sewing machines made 45s in World War II. So there was a conversion of the commercial industrial base to the defense industrial base. Now we're focused very intensely on the industrial base which is fine. I understand this committee.
▶ 1:29:39But if we were to invest in a facility to increase domest uh defense industrial base if we added funding to increase commercial in a modern technologydriven cost-effective factor of the future that commercial aspect not only offsets financial requirements for that that facility to maintain its solveny but it it also can be converted back to defense if necessary. And if the defense gets good and everything gets better, then you take the defense and you convert it back over into the commercial industry.
▶ 1:30:06This supports our re reshoring efforts that the tariffs and the current administration is pushing. It develops the commercial industrial base. So this is the seed for private investment to grow that commercial sector. I think focusing strictly on defense has limitations and I think that the financial obligations later is going to be the word sustainment. They're going to have their hand out for sustainment these facilities. If we build a factory such as the artillery factory that we proposed, it would serve as a model to any other component.
▶ 1:30:32Could be aircraft, it could be automotive, it could go in a washing machine, but the automation necessary takes funding to develop it's a bleeding edge. Following it will be a leading edge. So DPA funding to support a known requirement such as modular artillery components, uh not your standard 795 deforge, but your modular artillery rounds, that manufacturing technology, we would open our doors and have competitors and other industries come in and view it and duplicate that mentality and put that into other commercial applications.
▶ 1:31:02That's how DPA funding could set a tone for a commercial base.
▶ 1:31:06Yeah, thank you for highlighting that. and you look at the capability, flexible factories and the adaptive nature of some of the technology you guys are employing on your factory floors, uh really is the tip of the iceberg in terms of what's possible and if we can incorporate that with the with our approach here, I I really think we can respond to the to the times we're in. Uh Mr. Fallen, you you highlighted, you know, how title three helps you turn around a project faster. Instead of three years, you can do it in the first year.
▶ 1:31:36How does that cost sharing approach not just attract companies like Beehive or other um private sector operators but also the suppliers of capital whether that's banks or venture or other um sources of capital to have the confidence that this has got
▶ 1:31:53Yeah. So banks I mean banks and other investors they're trying to evaluate companies for risk in order to make investments and the cost of that investment depends on the perceived risk of the company. So I would say when there is um when there's government investment in projects it has a double benefit.
▶ 1:32:08One is it reduces the amount of capital you need to go raise and second of all it shows alignment with government priorities and pull from the government for the products that you're manufacturing and so it reduces the perceived risk of the company and so therefore you're able to to raise capital more quickly at a lower interest rate and uh and and have better runway for the company in the future.
▶ 1:32:28Yeah. So it's one thing though to send a demand signal. I mean clearly the government wants these things. So why isn't demand enough? Why does the why do taxpayers need to provide seed capital uh to certain sectors and how do you how do you strike the balance between that and just turn it into a planned economy where you've got some central planner picking winners and losers? How do you how do you get that right?
▶ 1:32:49Yeah, I think the the defense industrial base has been through cycles and you know we hear about you know forecasted ramps in production demand and but these are very very expensive systems to ramp up for right you're talking tens or hundreds of millions of dollars of investment. So private industry will naturally want to wait until the signal is here to start investing because essentially they're borrowing that money until the demand arrives and sometimes it it doesn't arrive.
▶ 1:33:14So I think um you know basically this allows us to go out and secure make those investments, secure that and not have to carry the risk of those investments actually getting put into full production at the at the timing
▶ 1:33:28Thank you. We'll have a second panel but um I'll yield my time and recognize the chairman of the full committee uh Mr.
▶ 1:33:37Thank thanks Chairman Davidson. Um Mr. facts. Just continuing that same theme. You made some comments in your prepared statement about multi-year and sustained funding. Those were comments that you made. And then the speed of war. Mr.
▶ 1:33:52Moore and I were at a meeting earlier this week out in in Wyoming where um that topic came up with some Silicon Silicon Valley presenters that they were very impressed with the Trump administration's approach to this issue, which is, you know, we're going to start working. We're not going to talk about it. We're going to take action and being a much more actionoriented administration. But you got to balance that with the comments Mr.
▶ 1:34:18Davidson just made about things that we need in the supply chain ramp up uh so that it's not government directing things, you know, that maybe don't have long-term viability. So, how do you balance all that? I just want to let you continue your conversation you were having with Mr. Davidson. you got 47 years of uh manufacturing experience.
▶ 1:34:41So what does DPA need to have changed in either the statute or its policy to balance that?
▶ 1:34:50I think components of that thank you for the question. The the components of that are actually built by several of the questions already came up. What is the requirement of uh private investment versus DPA funding? How how do those go together? What is the longevity? What is the risk? And and quite honestly, if you look at normal business growth, if you're double digit on a kegger, you're doing really well at 10%. We're asked to quadruple in a year. So these ramp up cycles aren't conducive to your typical business growth.
▶ 1:35:16As a matter of fact, if you tried to do that in a normal manufacturing business, and I'm not talking about a high-tech or something like that, but in hardcore manufacturing, high capital businesses, if you go to the bank and say, "I'm going to quadruple in a year," I think they'd rip up your application and throw you out. So these ramp up rates are a key component. the industrial base of it. When we look at what the longevity is, how long will you commit to how many rockets you want to buy? We don't really have that. And we don't make this back in a year or two.
▶ 1:35:41In fact, our investment in the factory because a vertical integration and cost savings offers approximately a 10% per unit cost reduction. So, if you really looked at a business cycle of ROI for what we're asking for, the government at that pace would be paid back in 10 years on cost reductions of purchase products. So, financial feasibility is not just welfare. give me money and I'm leaving. It's I'm going to give back to you. Now, if the government doesn't require that quantity over that period of time, you don't get your return on investment.
▶ 1:36:10That's true, but you're the one asking for it. I don't go broke because the bank wants me to answer for it when I'm not really the one who's demanding the product. So, that circle of debt, longevity, and flexibility with the commercial viability, I I can't emphasize that enough. leading edge technology, whether it's software, hardware, physical presses, or technology, is in most cases transferable. And when we're going to reshore things, we're not going to do it at twice the cost. We're going to have to be competitive to make that successful.
▶ 1:36:37No matter what anybody says, they they say by American, but there's a price tag associated. We have to be more competitive. We can take these specific demands, put them in a true ROI, and if it does or doesn't pan out, we still led engineering and manufacturing to a higher level and a higher capability level. Can I get you to break that down and use a practical example? You cited in your testimony, for example, that normal production of motorc cases was 350 to 400 or something like that, but the demand was 3,000.
▶ 1:37:08talk practicality here. To get up to a motorcase run rate, what kind of investment had to be made and over how many months did it take to achieve that? Just to use that practical example you referenced in your testimony. high level. Our original was around the $80 million investment for 1300, which is roughly 110 per month. When you look at the scalability for that, you want to start with a green field for the efficiency and the long-term return. You don't want to put a band-aid on something you currently have. You you go ground up.
▶ 1:37:36So, the facilitization in the first year is pretty much non-return on quantity. There's minor input improvements. In year 1 to two, certain pieces of equipment can be acquired, take our original capacity, and supplement that within year 1 to two. That helps significantly. In year two, most equipment is on the floor and gets evaluated and run off in year two to three. So you have a small incremental step in year 1 to two. Year 0 to one is not really a high return. Year three is where you really see your highest return and that's where you consolidate all the equipment.
▶ 1:38:06These these machines some in some cases will take weeks and months to move and years to get. So what you don't want to do is incrementally fund four small steps and not get to where you want to be. what we are offering and what I think needs to happen with companies like ours because I'm familiar with them. Great company. We're offering a national asset. We're offering something for the next 30 years, not four. This this is not a five-year investment. This is setting a tone and a departure from typical manufacturing. We We're not going to win if we keep doing what we've done.
▶ 1:38:34If we buy what we've had 10 years ago and it lasts 20 more,
▶ 1:38:37this world doesn't stay still for 30
▶ 1:38:39Thank you. We'll continue this discussion. I yield back.
▶ 1:38:42Thank you, Chairman. I now recognize the vice chairman of the full committee, Mr. Heisinga for five minutes.
▶ 1:38:46Thank you, Mr. Chairman. You're going to hear a central theme on this. Uh I leaned over to uh Chairman Davidson when he finished and and I said that's virtually exactly what I had written down as my question. I was just going to use slightly less porative language uh when when it comes to central planning.
▶ 1:39:04But I think that's a lot of the question, concern, feedback that uh that I think not just from colleagues but from taxpayers that we hear, which is why are we making these investments into an industry that isn't needed. Well, you can't predict war, right? Uh uh well, you can't predict mass war or something a conflict like what was happening in Russia and Ukraine.
▶ 1:39:32And I I wanna I I want uh you know, Mr. Faxton, you did a phenomenal job explaining it from from your perspective on what was what was sort of the ramp up in the need. Mr. Fallen, I'd like you to maybe expand on that or or or give us your take as well. I mean, you talked about perceived risk uh that really this is sort of uh in a way uh the government funding might be that bellcow as some might say, right? That it's others are going to follow that.
▶ 1:40:00they're going to uh they're going to view that as as a lead. Oftent times though when we are doing our appropriations, we want to see um you know end of fiscal year production. We have a much different timeline than than you might have. And I'm really curious, do you believe that the programs that we have uh one allow you to build the capacity for not just an immediate but for long term? How do we maintain that?
▶ 1:40:27two, do you have the flexibility to innovate and explore within those programs? And you know, one of the sort of the central themes of of a truly free market is, you know, the uh the the ability to fail and learn from that failure. Um, we don't like that when we're sending taxpayer dollars.
▶ 1:40:49We don't want to see failures, but are there enough places where you can take lessons learned and apply it so that we do have a stabilized uh production base?
▶ 1:41:00Yeah, thank you for that question. It's a great question. Um, I'll start with the last piece first. uh in terms of the ability to fail, I think when you use uh DPA title 3 dollars to support development, then it allows a government to partner with industry as they're developing the product, as we're understanding what are the risks and challenges that it takes to bring that product into full production. Um and then we can we can kind of navigate that together as we learn and and come up with, you know, solutions to solve problems that invariably come up through the through the development phase.
▶ 1:41:29So I think uh DPA allows us to partner in that phase versus if we were doing it on our own dollars, we'd be trying to figure out on our own. Uh and and sometimes the government can have uh solutions or resources they can bring to bear to also help in those situations.
▶ 1:41:42Yeah. Let me interrupt you super quick on that. I mean this is called the Defense Production Act.
▶ 1:41:46Uh so I think that makes a lot of sense to people when it's defense related.
▶ 1:41:51Are we focused enough with the DPA right now? Is it really into that defense mode? uh or have we wandered away from that uh from that core objective?
▶ 1:42:03Yeah, so my personal experience is primarily with DPA for defense. Uh so I can't comment necessarily on the percentage of funding that they make outside of defense. I would say that my experience so far is that it is focused on the priorities of the administration of the DoD. Uh so in our case, like we're working on these critical munitions that I think we've heard talked about as a priority from from uh the other folks in their earlier testimony. Um, so I feel like it is focused in areas that are important. I think it could it be improved? I'm sure it could.
▶ 1:42:33Um, what I would say is, uh, in terms of, you know, does the funding support ramping up to actually support the rates? Um, what happens if if volume changes? How fast can you change? Um, I would say one of the advantages of of additive is it can ramp up very quickly. It doesn't require like big mega foundaries in order to scale it up. You're basically buying things that look like uh inkjet printers, right? They're bigger. They're more industrial, but they look kind of like that. Um, in terms of timing, in 15 months, so in 15 months, we can double production.
▶ 1:43:04So, right now, we have the ability to make uh about 2,000 engines a year. In 15 months, we'll ramp that up to be close to 5,000. And then another 15 months after that, we could be ready to support uh close to 10,000, which is what we've been given by the DoD as a target. So again, you compare that to uh 100 years of manufacturing things conventionally and we can make 2,000 a year, right? So it's it's really promising I think what it can what it can offer. The other advantage of additive is it's easy to distribute.
▶ 1:43:33Um what that means is once you have a design and once you've kind of validated how to manufacture it, there's 3D printers all over the world, right? So in a time where there's uh you need a surge, we can take the design, we could export it to a DoD facility or another industrial facility and they could make the design from from our design just by putting it in their printer. It's a pretty automated process. You don't need a lot of specialized labor to do that. Um so it's it's pretty easily scalable.
▶ 1:44:00And the other big advantage is um you know a lot of conventional manufacturing requires very bespoke expensive longle tooling right in order to make a part. The 3D printer doesn't care what it's printing. It can print keychains one day and print gen engines the next day. It doesn't care, right? It doesn't have a memory. It's not targeted for anything specifically. The other advantage of that is as priorities for the DoD change, we can change what that capacity is being used for, right?
▶ 1:44:25So, Beehive has picked this mission because this is a big priority for the DoD and we think it's it's probably the area where additive manufacturing is most fertile. But as priorities change, the the capacity could change with the priorities to support what's what's being needed. Thank you.
▶ 1:44:43Yeah. Thank you. Um I'd like to recognize Mr. Moore from North Carolina for five minutes.
▶ 1:44:48Thank you, Mr. Chairman. One of the things that that I've heard from folks is that they feel like the way the procurement process is set up and you got and you all alluded to this in your comments really is geared toward large companies as opposed to small and medium-siz businesses. And if I think probably no better example than really here in Dayton when I think of a small business I mean two guys in a bicycle shop are what led to the birth of aviation.
▶ 1:45:17I mean, and that's the story of American ingenuity. Um, and if you look at how small and medium-sized businesses can be more nimble and agile and and dealing with market change and other things, obviously capitalization and financing, the challenge, Mr. Faction, you you mentioned it earlier.
▶ 1:45:35I just wonder any suggestions as guys who are in the trenches of ways that that the process can be improved in terms of the procurement and ways to really take advantage of this amazing uniquely American thing that we have in terms of the small and mediumsiz business. I think frankly that's one of the advantages we have over China and other places. Uh any any suggestions on how we change that to to fully utilize that?
▶ 1:46:05and you both are welcome to respond. So,
▶ 1:46:07yeah, thank you for that. Um, I think a couple of things and I referred to this in my testimony as well. I I think the first is um you know uh FAR15 contracts can be very complex, lots of slow down requirements. It requires uh in some places a lot of systems be put in place before you can start uh can really slow down the process. I think using OTAAS wherever possible is much more small business friendly. I think in our experience so far uh that's been the case, but it's not always the case. So, I'd say continue to do that.
▶ 1:46:35Uh, the other big one is um if there's a way to reduce cost share, I think it absolutely makes sense. You want companies to have skin in the game as well, right? You don't want them just to be gambling with government dollars. But right now, I think on average, Beehive's cost share on its programs is between 50 and 80%. Right? And so, again, these are still large investments. I mean, Beehive's invested over $300 million to date. There's not a lot of companies that can do that.
▶ 1:47:00not a lot of small businesses that can raise $300 million to put ourselves in the position we're in. So, I I think from my perspective, those are the two big ones. Also, I think for a new small business, the process is pretty complex and so maybe um a little more support navigating the process early on would be good as well just to make sure that that uh you know the the flowown of the requirements, the expectations are clear. Those would be my suggestions.
▶ 1:47:25Thank you, Mr. Fax. I think from a from a bureaucratic standpoint, I I wouldn't have any really strong input. What I would think is there are a lot of people out there that if if the DPA committee did a search for key capabilities and targeted the mid to smallsiz businesses, get out and go see them. Take people with enough authority and understanding to make an evaluation on the spot. Give them a checkbook. Give them authority. Get in front of the people. Have a discussion.
▶ 1:47:54evaluate them quickly, face to face, size up the companies, see what they can do, ask them, bring them into the fold. Go see them. I think that would be my encouragement to it. It's it's not a meeting that we all leave here and go to our different worlds. Go see them. Solicit them. Bring them in. Show them the path to be able to do what they want. There's many Americans out there today that are highly talented, work 12, 15 hour days if given the chance and and the avenue. I think I think going out to see them eye to eye. That would be my suggestion.
▶ 1:48:23And then and then in terms of doing that so a small company develops for example the prototype m you mentioned about like you know the the 3D printing that can be done but it sounds like maybe the capitalization to take that prototype which is needed into full ramp production. All right. What are you seeing that's working along those lines right now and where do you see where there's still the shortcomings specifically at that at that level?
▶ 1:48:46Yeah, I think in in our specific case, I think uh DPA and OSD were very uh creative in finding a way to to support what we're trying to do. So, typically uh title 3 dollars are really for capacity expansion. So, it's infrastructure. You're buying in our case, you'd buy printers, you'd buy CNC machines or whatever. Uh one of the things that I thought was a really great um innovation was looking at, hey, current suppliers can't meet capacity. So, part of expanding capacity is we have to develop a new option, right?
▶ 1:49:15So it included dollars for actual R&D so we can develop an option that then we can scale. So in our case about 70% of the funds were for actually working on the innovation and getting it ready to take to production. The other 30% was for capacity. Right. So I think that's that's a a nice change from the status quo and something that should continue. I think
▶ 1:49:37you Mr. Anything?
▶ 1:49:39Thank you. Mr. Moore look um Mr. Faction, when you were speaking earlier, I recalled a conversation with my banker at one point who said, "Did you ever think about growing more slowly and maybe playing more golf or what was growing a little too fast for the taste of the bankers?" And frankly, for the taste of the bank regulators who wanted to start treating my line of credit as if I was using 100% of it and when I think you Mr. Fallen, you highlight the the amount of capital raise you've been able to do.
▶ 1:50:04It's a lot easier to raise capital for something new and sexy that could turn into a giant market someday than for old technology. And you know, as promising as additive manufacturing is and capability, it still can't do everything that you can do with a cast part and certainly getting the hardness and capability out of forgings. That's old, not so sexy tech. How do you raise the capital for things like that? And how important is it that DPA or other means do it?
▶ 1:50:31Because the private sector market has plenty of demand for castings, forgings, injection molded parts or metal stamped parts. But if we lose that capability, which largely at scale we have already, uh we don't have surge capacity in our country. So, uh maybe if you guys could highlight and touch on that.
▶ 1:50:50Sure. I mean, um you know, in a in a missile, uh only a small part of it is printable, right? So I think to the point made earlier, if you're missing one part from a system, then you don't have the system, right? So I think it's not a one-sizefitsall approach. I think you have to look at kind of holistically across the whole system where are the bottlenecks and how can you address those bottlenecks. So I you know our our view is like additive manufacturing does play a key role, but it's not the only one and there are other areas that are going to need support as well. So businesses like Mr.
▶ 1:51:21faxins, right? They make a part of the the weapon as well. And it's not additively manufactured for the most part. It's got conventional manufacturing, but those things also have to be ramped up in order to support the ultimate final demand.
▶ 1:51:35Thank you.
▶ 1:51:37I think something I would add is when we talk about the defense industrial base, there's really a broad variety of technologies. I'm incredibly impressed with the capability of additive. We're not going to make a 30,000lb bunker buster bomb through additive. That's that's not on next week's agenda. But what is important is to say what companies can fit what roles. There are companies like Boeing and Northrep. If you want a fighter plane, don't talk to me. But if you talk about subcomponent and component levels, and it's block and tackle, it needs to be done.
▶ 1:52:05Takes a lot of hours, equipment, it's just it's just work. Then you can go to these other places. And I think if you really want to increase the capacity, you've got to define where the requirements of the work scope is. We we don't make satellites. We don't communicate with laser beams, but what we do is we make metal parts. If you can allocate some of that capacity to this mid-level small business, they'll bleed for you. They'll be dying to get that business. Now, that leaves capacity and other things for the more technical things that the larger companies really are good at.
▶ 1:52:35So, I I think that's important to differentiate what the work scope is. It's not all the
▶ 1:52:39Thank you both. I recognize Chairman
▶ 1:52:42Thank you, Chairman. Uh I wanted to follow up uh Mr. Fen on some of your testimony you made reference to accelerating contracting tools. Could you elaborate on that?
▶ 1:52:55Yeah, I think um the primary comment is uh you know OTAA contracts or other transactional authorities uh give more flexibility in terms of terms and conditions and uh also like
▶ 1:53:05can you give us an example just compare one this you know non using that to using it.
▶ 1:53:11Yeah. So for example, if I mean there there's two primary ways to do contracting. One would for defense one would be like through a FAR15 contract which requires uh much more detail in how you plan to allocate costs. Much more detail in how you roll up costs. You have to have uh cost accounting audits performed on various components.
▶ 1:53:29um for a small business especially a small business that isn't in production yet being able to provide like validated costs for something that's not invented yet becomes extremely difficult right and so uh OTAAS allow you to use like engineering estimates best judgment you still have to substantiate it I mean it's still competitively bid so you know nobody's taking advantage of the government but it gives more flexibility when you don't have that background or you're making something that hasn't been made before
▶ 1:53:56another piece of your testimony I thought was interesting. I I do think we have to have critical elements made here, whether it's um particularly in the defense arena, but I've also been someone who, you know, if it's made in other places that are allies of the United States, I think that's good. It might be at risk. For example, no one questions the extraordinary manufacturing capability in invention, hard work, dynamism in South Korea or Japan.
▶ 1:54:26But as a supply chain, if we were in a Pacific conflict, that would be not the ideal location. So this idea of French shoring, I think it's in important to collaborate and spread that out benefits the entire allied nation in case of a global conflict whether it's in Europe or Canada, the US or in Asia. So tell me a little bit about alignment. You make your point about the allied industrial base.
▶ 1:54:53So the work your two companies are doing and the designs you take those would be as you say in your particular case at Beehive uh in those other industrial bases. Is that right of what do we need to be doing differently in DPA to reflect that?
▶ 1:55:12Yeah, I think um what I'm referring to in my testimony is really around like having like common standards um so that when you're gonna if you're trying to offshore a design, if we're going to take our design and send it to Australia as an example for them to manufacture, I mean the closer uh the the systems are together like we use a certain kind of printer, if they use the same kind of printer, then the design is directly
▶ 1:55:35If they're using a different kind of printer, then there's a lot more.
▶ 1:55:38You think Mr. Frankston's doing that? Is he doing a good job of that over at DoD? Is that you think that is inside particularly the five eyes countries, but our principal partners is that is that the standard that we try to do
▶ 1:55:50Um or no,
▶ 1:55:52it's it's hard for me to say from my seat. I don't have full visibility of it. I I would say that my experience so far is not obvious that it's true.
▶ 1:55:59Okay. But that's an area we could collaborate on, ask questions about
▶ 1:56:03Yeah, that's right.
▶ 1:56:04I think I yield back, Mr. Chairman.
▶ 1:56:06Thank you, chairman. I recognize the vice chairman of the full committee, Mr.
▶ 1:56:10Thank you. And uh I'm going to uh actually kind of continue where the chair was was going with this a little bit. Um three of us up here have a have a side gig of being on the foreign affairs committee uh as well. And uh and uh I I had actually been the author of the AUS submarine uh authorization and and we've seen some push back on that because of a capability. I'm sorry, not capability but capacity issue.
▶ 1:56:40Um, and I think it was uh Mr. uh Fallen, you had talked about sort of the four recommendations that that you and Beehive had. Uh, we've kind of gone over the support the reauthorization of Title 3. We talked a little bit about the more agile non-defense manufacturers being able to uh to qualify.
▶ 1:57:01It seems like we are heading down that road of number four, the allied initiatives, uh how we align uh with those and if you need to expand, either one of you expand on on that. But I also want to go visit what I think was your number three recommendation talking about hightemp alloys uh being needed and and um and so touch on number four uh with our allies uh but then how how do we then address this this need for the hightemp alloys?
▶ 1:57:32thank you. So um yeah, I think the the places where the alignment makes sense is you know do we have the same materials available at the partner nations right? So um you know the the process for how you manufacture these things does require some commonality. So if the alloys are similar composition or preferably the same composition um meet the same specs that helps the process a lot.
▶ 1:57:53Um also like I said before the infrastructure like different machines will require different programming different interfaces and so having some understanding of what that looks like at each location would enable you to be able to distribute the manufacturing much much faster. And then there is still some there is still some specialized labor at the end of the day. You have to assemble these bits and pieces into an engine and um that takes some time.
▶ 1:58:17So if you can if you can plan these things in advance and kind of manage it as a program then you will when you actually need to flip the switch you get there a whole lot faster. So that's really what I'm do we have do we have current alignment?
▶ 1:58:30Um I think it's yet to be determined from my perspective. I think
▶ 1:58:33how come
▶ 1:58:35what needs to happen for you to determine that we have that? Yeah, I I think um again, my experience is limited just to Beehive's experience, I would say, but I I think we're we're kind of pre-production. Um and so maybe we're not at the point yet where that would start to happen. I will say we have a contract with the Air Force. Part of that contract is to do a external production demonstration where we're going to take our design and send it to a third party and have them manufacture it. So I think that's a that would be a US party to start. So I think that's the first step in that direction.
▶ 1:59:03And then ultimately I think it would be hey if we want to really take advantage of this forward I won't call it forward deployment but like distributed logistics distributed manufacturing then the next step would be to pull in these these friendly nations and and do a similar process right just to anticipate the problems in advance I think we haven't done it because the process isn't there yet um we're probably a year away from being there right so it's something to think about for the future
▶ 1:59:28how do we address this need for hightemp
▶ 1:59:32yeah so Um I would say the number one problem we see are uh things like titanium. Most of the world's titanium comes from Russia and China unfortunately and titanium is a really common alloy uh and and aerospace products. It's pretty high temperature capable. It's lightweight. Um and so there are uh North American titanium suppliers that are able to grow. I think investing more in those North American suppliers to scale up and be able to to provide those materials is essential.
▶ 2:00:02There's also Canada has has sources of titanium. There's other friendly nations. I think in the past they haven't been developed because there was a global supply and it wasn't needed. But I think it's one of the big challenges we face. Um I think uh Representative Moore he talked about how in in North Carolina there's a like one of the only copper smelting plants left in the country. Um there's an element called reinium which isn't doesn't exist in nature. The only way you can get it is from the smelting of copper.
▶ 2:00:30And that reinium is really what is like the secret ingredient in a turbine blade which is the most critical component of a jet engine. So I think things like that like how do we invest in those sources so that we can do it independently. In the past I think you know some of the you know politics change like some of the countries that we're competitive with now we weren't as competitive with 20 years ago and it wasn't a problem but we've kind of backed ourselves into a corner on a couple of these materials like titanium and reinium. maybe over.
▶ 2:00:59Yeah, maybe. So, Mr. Jackson, 10
▶ 2:01:02Okay. If I could add one thing, our solution for this is not nearly as sexy and everyone who says just in time is going to hate this. What we what we proposed in the DPA funding is not only for the equipment, but for buffer stock of material because the lead time is months, months in some cases. So, if we put a beautiful factory together and don't have material, we're going to twiddle our thumbs. So, our issue was DPA funding. No business wants to hold six months of inventory. But if we're going to build the factory in a crisis mode, we better have material on the floor.
▶ 2:01:27So that onetime buffer to feed out of and feed into would be my suggestion because we we don't have the versatility of some of things. But we would we would build buffer stop and uh DPA funding would be key for that. Thank
▶ 2:01:40Good stuff. Thank you. Uh now recognize for the final set of questions, Mr. Moore from North Carolina.
▶ 2:01:46Thank you, Mr. Chairman. Actually, I don't have any questions. uh these two witnesses have done an amazing job uh addressing I think the questions of the members. I just would offer up to either of the gentlemen if you if there was something you wanted to say in response to any questions you didn't get a chance to do uh I'm going to allow either of you to use my time to do so.
▶ 2:02:07Uh honestly I don't have any questions back for you. This is my first experience doing a congressional hearing. I think it's been uh it was an honor to be able to be with you guys today and understand a little bit how the process works. U like I said, I mean our experience at Beehive is relatively limited to date. We we haven't had a title 3 contract yet. We're actually in the process of negotiating it now. But um I would say overall our experience with the process has been great. Uh AFL has been helpful. The Air Force has been helpful. OSD has been helpful.
▶ 2:02:35So just glad to contribute and help where we can. Thank you.
▶ 2:02:41I would second that. I it's it's a pleasure to be here. It's an honor to be here today. Thank you for the invitation. I appreciate the chance to verbalize and share some of the thoughts that we have every day in our factory. And uh I appreciate your time and your commitment to hear that. And I would say if there was one word I could use, it's urgency. Don't overestimate capability because you open a checkbook. It may not buy time. So urgency is my message today. Thank you.
▶ 2:03:04Would the gentleman yield?
▶ 2:03:06Just curious on the stockpile comment you raised. I thought it was quite a good one. and uh you or have your own micro parochial interest on stock piles, but I think it would be good, Mr. Chairman, if we got DoD to send us if it's classified or unclassified, you know, an analysis of US stockpiles and these critical minerals. But Mr. Fraction, you want to comment on stock piles a little further and I'll yield back to my friend after your answer.
▶ 2:03:32Yes, because we we speak about materials and that could go from the base alloys. Uh it could be the titanium sponge to make titanium. It could be nickelbased alloys for high temperature alloys. We can talk about the micro elements of mining. But we can also talk about stockpiles of raw material. But before we can machine it, we may have to go through processes such as forging, rolling mills, etc. So when we talk about lead time, there is a wide variety of saying, hey, we have material, but that doesn't mean it's ready to go into a factory.
▶ 2:03:59So these multi-month lead times and some of these constraints like a forging house or a casting facility, these all have to be considered. So the reality and our push was to be vertically integrated. So we weren't dependent on outside services to be able to meet your needs. And that material in that stockpile is really counterintuitive to typical business practice. We don't want material sitting too much. But in this case, because urgency of timing, I think it's a smart use of funds to buy that time and feed out of it. Once you do it one time, you don't have to do it twice. The buffer remains.
▶ 2:04:28It's first in first out. You have to buy it once though. And that's where the DPA funds could be very handy. you. Um, I want to thank uh my colleagues. I want to thank our witnesses. I thank the staff that did all the work u both in the house but here at Wright Patterson Air Force Base and out at the DoD. Uh really nice to do a field hearing and bring this out in the community.
▶ 2:04:49I think it's a great way to highlight the capabilities really from around the country but you know in particular again right here in the heart of it all in Ohio and uh the great capabilities at Wright Patterson Air Force Base and our own supply chain. But um we have a huge challenge. It's great to see that we're talking about a whole of nation approach to it and u and also with our allies and so without objection all members will have five legislative days to submit additional written questions uh to the chairman.
▶ 2:05:17Uh the questions will be forwarded to the witnesses for their response. Uh witnesses if you get them please respond no later than September 17th. The hearing now is adjourned.