Welcome to the December edition of A Capitol View
The first high-level DoD summit on advanced materials is around the corner. And the invite-only Advanced Materials Summit is shaping up to be a who’s who of government R&D and acquisition officials and industry leaders hashing out new strategies for transitioning alloys and other novel materials into weapons platforms ranging from gun tubes to warships.
The gathering, to be held Jan. 8 and 9 in Washington, will be hosted by SMI on behalf of the Office of the Secretary of Defense and is sponsored by Cerion Nanomaterials and EWI.
The big goal: The event will identify the greatest barriers to transitioning advanced materials into defense programs and develop actionable plans and novel approaches for promoting full-scale manufacturing of these critical materials.
Some of the officials invited include Steven Wax and Victor Pugliano from the Office of the Secretary of Defense for Research and Engineering.
Also on tap to deliver updates on the advanced materials roadmaps of the Army, Navy and Air Force will be Adam Rawlett, senior research scientist at the Army Research Laboratory; Jennifer Wolk, a division director at the Office of Naval Research; and Richard Vaia, chief scientist for the Air Force’s Materials and Manufacturing Directorate.
DoD will also provide an update on the Materials Genome Initiative, the multi-agency initiative “for discovering, manufacturing, and deploying advanced materials twice as fast and at a fraction of the cost compared to traditional methods.”
Clearing new paths: Also on tap is a panel discussion on acquisition officials from across DoD. We will hear from prime integrators and suppliers in the defense industrial base. And there will be a series of discussions focusing on how to expedite the requirements and acquisition processes, addressing industrial base needs, and new approaches to modernizing the qualification and certification of new materials.
We will also hear from prime integrators and critical suppliers in the defense industrial base and other discussions will focus on how to overcome the obstacles to expediting the transition of novel materials; reforming requirements and acquisition policies; industrial base needs; and modernizing the qualification and certification processes.
Participants will gain insights into the specific needs and challenges of the defense sector, remain at the forefront of emerging technologies, and build valuable relationships to access crucial resources, expertise, and potential funding opportunities.
Contact SMI VP Bryan Bender to learn more.
Industrial base alert: New DoD industrial base strategy warns arms industry struggling to keep up with China, via POLITICO.
SMI SPOTLIGHT
DEEPER BENCH: SMI welcomed to the team as its newest Director Stephen Coffey, an accomplished public servant steeped in the congressional budget process, to build on our success helping clients achieve their legislative and policy goals.
Coffey most recently served as deputy chief of staff and legislative director for Rep. Matt Cartwright (D-PA), a senior member of the House Appropriations Committee.
“Stephen is a tremendous addition to the SMI team,” said SMI CEO Bill McCann. “He brings a command of the appropriations process that comes from years of hands-on experience. Stephen will add great depth on both the appropriations and policy front.”
“I’m very excited to join the top-tier team at SMI,” said Stephen. “I’m looking forward to using the experience I’ve gained during my ten years in the House to help industry leaders better understand and navigate the funding process and policy decisions made inside the halls of Congress.”
Industrial policy: SMI is also pleased to welcome as a new associate Tasden Ingram, who most recently advised the Department of Defense on identifying industrial base shortfalls and will help clients fulfill urgent needs to strengthen the supply chains for critical minerals, hypersonic weapons, and more.
Tas comes to us from defense and aerospace consulting firm ANSER, where he advised DoD’s Manufacturing Capability Expansion and Investment Prioritization (MCEIP) office, which was established to make targeted investments in major and sub-tier suppliers to mitigate supply chain risks.
He also managed day-to-day operations of the Industrial Base Analysis and Sustainment (IBAS) program, which focuses on investments in the submarine and shipbuilding workforce; kinetic weapons; microelectronics; critical chemicals; castings and forgings; and energy storage and batteries.
The additions come on the heels of other recent hires to sharpen SMI’s expertise in manufacturing and expand its energy and defense teams.
More: SMI hires seasoned appropriations advisor Stephen Coffey
BUDGET
FOR BETTER AND WORSE: It looks like the House and Senate are closing in on a final deal to pass the National Defense Authorization Act before the end of the year, despite partisan wrangling. But the outlook for defense appropriations remains murkier.
SMI VP Maria Bowie, a veteran of the process, believes Congress is ultimately going to pass a defense appropriations bill but it will be much later than desired.
“This continues the budget disruption and if lawmakers fail to act on the FY24 defense appropriations bill over the next two months, delayed contracts and program cost growth are certain to increase,” she said.
What’s next: House and Senate leaders must decide if the spending caps set in the Fiscal Responsibility Act will stick. The Democratic-controlled Senate is seeking to spend more than the GOP-led House.
Another temporary continuing resolution to keep the government running could be in the offing as far right Republicans push for broad federal spending reductions and new border security measures.
“Passage of yet another stopgap spending bill is a frustration for military leaders and budget planners, as it means the military may be operating under last year’s funding levels for at least one-third of the 2024 fiscal year,” Maria says.
Backed up: It also means that next year’s budget process will already be behind the curve.
“Drafting the annual budget request is a long and complex process, and the lack of an on-time appropriations bill disrupts next year’s FY25 budget request,” according to Maria.
“Annual budget requests are supposed to be released in early February, but delays in finalizing the FY24 budget are likely to push the release of the FY25 request back to March or April due to the prolonged CRs.
“Without knowing the amount of funding enacted for FY24, program managers don’t know how much money they have to work with, making it more difficult for them to calculate future funding requirements,” she added.
Related: Lawmakers Want $26 Billion for Programs the Pentagon Didn’t Seek, via Military.com.
Go deeper: From Trump to Congress, Republican defense orthodoxy crumbles, via Defense News.
LIFE SCIENCES
BUILDING CAPACITY: SMI client Civica Rx, the non-profit generic drug maker, testified before the Senate Finance Committee on Dec. 5 on more effective policy and legislative solutions to address drug shortages and reduce reliance on foreign sources, especially China.
“Chronic drug shortages have now become a built-in outcome of the current system,” Allan Coukell, VP of public policy, told the panel. He predicted that “shortages are more likely to increase than to abate in the years ahead,” in large part due to market forces.
‘Changing the current system.’: “The immediate cause of most shortages of sterile injectable drugs is quality problems in the manufacture of the finished dosage form,” he explained. “But it is widely acknowledged that the root cause is the low cost of these products, which reduces the incentive or ability for manufacturers to invest in quality or in newer manufacturing facilities and pushes production offshore to low wage markets where quality problems proliferate.”
“Therefore,” he added, “policy responses should focus on changing the current system that causes shortages because it favors low prices over resiliency of supply.”
Civica, established in 2018 by hospitals and philanthropies, is delivering more than 80 drugs at risk of shortage – typically old, low-cost, but essential, every-day medicines required in hospitals across the country that do not carry a high return on investment.
MANUFACTURING
MORE RUNNING ROOM: SMI client New Balance broke ground on its sixth U.S. factory in Londonderry, New Hampshire, where the footwear manufacturer is investing $70 million in a 102,000-square-foot facility that will add more than 150 jobs by 2025.
“Our state’s entrepreneurial spirit has always made New Hampshire a great place to open or expand a business, and I look forward to seeing how New Balance’s expansion will help grow our economy,” said Sen. Maggie Hassan (D-NH), who was on hand for the event.
“New Balance has a long and proud history of making products in America and here in New England, and today’s groundbreaking marks the start of the next chapter in that legacy,” added Rep. Chris Pappas (D-NH) who also attended.
The bigger picture: New Balance CEO Joe Preston, applying the company’s recent experience, also made a strong case in an opinion column in the New Hampshire Union Leader for tax reforms, greater federal grants and loans, and workforce development programs to “seize upon this resurgence in manufacturing to make it a renaissance.”
Some steps that Preston maintains can be taken swiftly:
— “Congress can ensure the tax code spurs businesses to manufacture goods in the United States and invest in innovative new technologies, machinery, and production solutions. That begins with restoring the domestic research and development tax credit, which lapsed last year, so companies can fully deduct investments in more innovative manufacturing solutions. At the same time, the ability to annually deduct the full cost of major investments in new equipment would go a long way in spurring manufacturers small and large to spend their own money on expansion plans.”
— “Second, small businesses that play a critical part in our supply chains are particularly in need of infusions of capital, including federal grants and loans for new industrial equipment and technology. These federal investments would help supply chains be more resilient in the face of new competition or another crisis.”
— “Lastly, without sufficient skilled workers for today and tomorrow, these forward-leaning policies will only get us so far. We are piloting programs with technical high schools to promote curriculum that teaches the critical know-how required to modernize U.S. manufacturing processes and connect IT, engineering and robotics and other innovations on our factory floors. The government can do the same, by bolstering existing jobs programs and establishing new programs that connect local high schools, community colleges, and manufacturers as well as revitalizing apprenticeship programs.”
For your radar: President Biden Announces New Actions to Strengthen America’s Supply Chains, Lower Costs for Families, and Secure Key Sectors, via The White House.
TECHNOLOGY
WHERE CREDIT IS DUE: Speaking of the R&D tax credit, SMI is collaborating with other advocates to keep pressing Congress to once again allow companies to deduct research and development expenses annually instead of spreading them out over five years.
The tax change is particularly harmful to small innovators, especially those that have won Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) awards.
The campaign includes a new set of cases studies highlighting how innovators across the country are struggling to survive in the face of the new tax burden under IRS Section 174.
Existential threat: “They followed the rules, they competed for government support for their high impact, high-risk visions, and they won,” the report asserts. “They used every dime of this support to hire scientists and engineers to advance their products and services. But as much as they beat the odds in developing groundbreaking products, these companies could not have anticipated the tax burden that now threatens their existence.”
Related: Proposed Guidance Will Eviscerate the 40-year, $54B Federal SBIR Program
Read more: Nearly 150 Members of Congress Encouraging Pro-Growth Tax Legislation, via Rep. Rudy Yakym (R-IN).
Plus: Manufacturers to Congress: Restore Pro-Growth Tax Policies Now, via National Association of Manufacturers.
ENERGY
POWERING UP: SMI is at the forefront of helping some of companies and universities to power our clean energy future – and we’re closely tracking the Department of Energy’s plans to invest an additional $3.5 billion to boost domestic production of advanced batteries and battery materials.
New and expanded facilities: “The funding will create new, retrofitted, and expanded domestic facilities for battery-grade processed critical minerals, battery precursor materials, battery components, and cell and pack manufacturing, all of which are critical to supporting clean energy industries of the future, such as renewable energy and electric vehicles,” the agency said.
SMI’s first-in-class energy storage team will be advising clients on how to most effectively respond to the new funding opportunity, which is the second phase of $6 billion provided by last year’s Bipartisan Infrastructure Law.
The role of recycling: SMI analyst Emma Modesitt attended the Battery and Energy Storage Conference at DOE’s Argonne National Laboratory, where officials highlighted the pressing need for EV battery recycling.
Officials estimated that with a 90 percent recovery rate for lithium-ion batteries, the U.S. would no longer foreign dependence on nickel and lithium. The meeting also featured sessions on transportation electrification, the future of energy and grid-scale energy storage, and a presentation from Celina Mikolajczak, chief battery technology officer at SMI client Lyten.
Looming deadline: Concept papers for the new funding opportunity are due January 9, 2024, followed by full applications on March 19, 2024.
The agency’s FEOC guidelines bar applicants if 25 percent or more of the company’s stock, voting shares or board seats are held by people or businesses located in designated countries such as China.
Related: Manchin blasts exemptions in Biden administration rule on foreign EV parts, via The Hill.
STRATEGIC COMMUNICATIONS
A ROOM WITH VIEWS: VP for Communications Strategy Bryan Bender also hosted the latest in a series of private salons in SMI’s DC offices – this one focused on how commercial space companies can better interface with the government.
A captive audience: On hand were senior leaders from the U.S. Space Force; Defense Innovation Unit; Federal Communications Commission Space Bureau; The Aerospace Corporation; Voyager Holdings; Relativity Space; Maxar Technologies; CisLunar Industries; The Lowell Center for Space Science and Technology; Specialty Materials; National Security Space Association; and Breaking Defense.
CLIENTS IN THE NEWS
New Balance factory breaks ground in Londonderry, N.H., projected to add 150 jobs, via Boston Globe.
Racing For Place In The New Space Race: Customers Seek Launch Options, via Forbes.
Why the U.S. Navy Needs the Constellation-Class Frigate to Be a Success, via The National Interest.
