No. 16. Back to the Future? Second Sourcing in Defense Acquisitions

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July 12, 2023—The latest White Paper of the Greg and Camille Baroni Center for Government Contracting, “Back to the Future? Second Sourcing in Defense Acquisitions” argues:

“Second sourcing in particular offers one strategy to counter the DoD’s unsightly dependence on single and sole sources of supply. Second Sourcing does not provide a panacea to all the supply chain issues faced by DoD, but an increase in the use of second sourcing methods could be used to pivot the U.S. defense industrial base away from the current status quo of peacetime efficiency and towards a new baseline of readiness to ensure overmatch against competitors like Russia and China.”

Written by Center researchers Olivia Letts, Jerry McGinn, and Richard Beutel, this white paper examines the potential for a comeback of second sourcing, which is the practice of using at least two different suppliers to provide goods and services that are comparable or identical in form and/or function. The paper does this by analyzing its rise and fall, pros and cons of different forms of second sourcing, and its relevance in current defense acquisition affairs. The authors conclude that second sourcing, when implemented effectively, has the potential to seriously help eliminate bottlenecks and production shortages faced by the U.S. defense industrial base as currently experienced by the United States in its support of the Ukraine war effort. It also identifies several major barriers that must be overcome to resuscitate this practice and enhance supply chain resiliency.

From the authors

“. . . second sourcing efforts cannot be implemented in isolation. Rather, new second sourcing initiatives should be accompanied by various complementary measures as part of a conscious mindset shift within the defense community to emphasize that cost efficiency must sometimes take the back seat where defense priorities are concerned.”

The authors make a set of recommendations for the government to implement targeted, fiscally sound, and effective second sourcing efforts:

  • Prioritize agility and resilience over cost savings;
  • Create better financial incentive structures for second sourcing;
  • Devise better methods for prioritizing where to second source;
  • Expand the use of open systems architectures in defense programs;
  • Secure necessary data rights and establish second sourcing precedents as early as possible;
  • Move away from the “leader-follower” method of second sourcing; and
  • Consider international defense supply chains, including the capacities of both allies and competitors.

Find the report on the Baroni Center Research website.

Download the White Paper.