The U.S. metal stockpile policy is on the verge of its
biggest overhaul in the past 15 years amid increasing
trepidation about the country's dependence on foreign
DLA Strategic Materials, formerly the Defense National
Stockpile Center, was created in 1939 to prepare for World War
II. At the end of the Cold War, however, the government agency
moved from buying metals and commodities to selling off its
massive surpluses. DLA commodity sales have totaled about $7
billion since 1994, and the market value of the remaining
stockpile is around $1.6 billion.
But there has been a growing chorus in recent years that the
current stockpile system is outdated and inefficient. In 2006,
Congress expressed concern that global demand for several
defense-specific raw materials had escalated due to industrial
surges in China, India, Russia and Brazil, and it formed a
working group to reconfigure the DLA's strategic materials
security program to ensure greater flexibility and the
availability of important materials.
The DLA is scheduled to present a report to Congress later
this year that will focus on determining the potential risk to
existing supply chains and recommend a strategy to minimize any
identified disruptions to supply. The report is expected to
recommend that the military have greater authority in how it
secures metal, according to market sources.
"It's my understanding that the report is done and that the
DLA is trying to push it up the system. However, there is some
push-back, as the traditional use of the stockpile has been to
sell (metal) and come up with extra money for (Defense
Department) pet projects," a U.S.-based government policy
analyst said. "Eventually, either they are going to run out of
stuff in stockpile and the gravy train will end or (Congress)
will make smarter strategic changes and advance forward."
One major challenge for the Defense Department is that it
can't add new material to its stockpile list without
congressional approval, an onerous process that can take years
to complete. "There is a big bureaucracy between the stockpile
administrator, the White House and Congress," the analyst said.
"We're talking about a broad authority that spans across many
jurisdictions. It certainly isn't the most nimble system. In a
world where technology is outdated in a matter of months, it's
a bit silly to have a system where it takes an act of Congress
to authorize buying a new metal."
Ronnie Favors, administrator of DLA Strategic Materials,
wouldn't provide specifics on what the report contains, but did
say recently that the agency is looking to move toward
strategic sourcing and partnering with foreign nations.
The DLA currently is exploring a new materials management
system under which it would pay for, and have access to, mill
products that would be held by producers in "virtual"
warehouses rather than in government-run warehouses.
The agency earlier this year launched the so-called
Strategic Materials Security Program, a pilot program where the
DLA issued a solicitation to procure up to 167,000 pounds of
titanium annually for the U.S. Army and Navy. In addition to
allowing the DLA to make joint purchases across the armed
services, the program focuses on providing government access to
stocks of titanium ingot rather than sponge or finished
products because it's a much more flexible intermediary.
There also are new budgetary concerns, DLA director Vice
Adm. Alan Thompson said during a guidance in August. "It's a
very different environment than the one we've been in for the
last decade," Thompson said. "The defense budget is going to be
increasingly pressured in the next few years. The good news is
we've been talking about this in DLA for awhile, and we've been
talking about the need to make adjustments sooner rather than
later because it is far less disruptive if you do that."