Impact of Constrained Lithium Supply to the US Defense Industrial Base

By Lt Col Paul Frantz, USAF, Student, Seminar 13, The Dwight D. Eisenhower School for National Security and Resource Strategy, National Defense University

Impact Of Constrained Lithium Supply To The Us Defense Industrial Base

Over the last twenty years, lithium (periodic symbol: Li) has evolved into a critical material for the US Defense Industrial Base (DIB). Uses for lithium within the DIB and the US economy continue to expand. The increasing reliance on lithium is readily apparent to casual observers. However, the fragility of the world’s lithium supply chain remains more challenging to perceive. Over the last decade, the lithium supply has lagged behind demand across the market. With regard to national security, how lithium limits the surge capacity of the DIB is particularly concerning. The negative impact on the DIB’s surge capacity is not a forecasted problem; instead, it is a present and worsening problem. Policymakers should view risk to the DIB and national security as unacceptable. US policies and corresponding strategies must quickly evolve to address the ongoing and projected challenge to the lithium supply chain and the associated negative impact on DIB surge capacity.

BACKGROUND – WHAT LITHIUM IS / HOW IT WORKS / SUPPLY CHAIN HISTORY

Scientists identified lithium as a distinct alkali metal element in the year 1817. However, the use of the new metal proved difficult as it did not respond to conventional electrolysis—the process used to isolate and separate some metal elements found in the natural environment.1 It was not until the latter half of the nineteenth century that scientists were able to isolate lithium through extreme heating paired with electrolysis.2 From this point forward, lithium received use in a wide range of applications—most of which have emerged in the postindustrial era.

Lithium’s innate resistance to regular electrolysis remains key to the material’s usefulness. At room temperature, lithium is stable and does not easily break down when exposed to a sustained electrical charge. Lithium is also much lighter than most alkali metals. The combined features of resistance to deterioration, conductivity, and low weight relative to mass have made lithium an attractive material for batteries.

As uses for lithium expanded during the twentieth century, supply generally kept pace. However, lithium’s supply and demand profile evolved in the twenty-first century. Demand has increased exponentially with improved battery technology and expanded product applications, including significant growth in telecommunications, transportation, and power storage.

Various forms of lithium receive use across a wide range of commercial applications, including high-end manufacturing alloys, medicine, ceramics, and air conditioning.3 However, over the last fifteen years, batteries have consumed most of the world’s lithium supply. Presently, battery production consumes 65% of the lithium market, with most production occurring in China. The balance of raw lithium usage spreads across the following sectors: ceramics and glass – 18%, lubricating greases – 5%, polymer production – 3%, continuous casting mold flux powders – 3%, air conditioning equipment – 1%, small scale/niche uses – 5%.4 Global demand for lithium remains on track for tremendous growth in the coming years. The next three to five years, in particular, promise to be especially challenging.

The chart at figure 1 depicts the severity of the lithium supply problem. The black line within the chart depicts current and forecasted market demand. Yellow bars speak to proven production, while blue depicts additional forecasted production. The shades of blue indicate degrees of risk – dark blue bars have solid footing, while lighter shades of blue indicate increased risk concerning production and availability.

Until recently, lithium production has kept pace with rapidly expanding demand in the market. However, due to COVID-19 related impacts on market behavior, lithium supply temporarily surpassed demand—this resulted in a tapering of global production, a dramatic price drop, and a (false) sense of confidence. The surplus lithium supply has now been exhausted, and production has not ramped up sufficiently to meet current demand. The spot price for lithium is now at an alltime high and almost 500% higher than last year. The present problem is challenging enough, but it pales compared to projected supply problems over the next three to five years. Furthermore, problems over the next ten to fifteen years may prove disastrous without change across the market.

The chart at figure 2 depicts the Chinese market price of lithium over the last five years. The chart is depicted in Yuan as most lithium component manufacturing occurs in China.6

Over the last decade, especially in the last five years, commercial sector demand for lithium has advanced primarily through global Electric Vehicle (EV) sales. Figure 3 depicts global EV sales through the last ten years. Despite the challenges of the COVID-19 global pandemic, 2021 proved to be a banner year for the electric auto industry.

Lithium And The Defense Industrial Base

As with commercial demand, defenserelated lithium requirements have steadily increased over the last twenty years. However, the need for lithium within the defense sector will, in all likelihood, expand sharply over the next five years. Should a conflict with a peer or near-peer competitor occur, the gap between supply and demand may reach new extremes.

Along with extensive use in batteries, lithium enables several additional capabilities within the defense sector. Examples include alloys used in steel armor plating, combat-rated impact glass, and several polymers needed for aerospace, cyber, nautical, and space-related hardware.9 Lithium-related demand within the defense sector is poised to grow sharply in the near term. Two defense requirement categories will drive this change; these are (1) autonomous vehicles and (2) microgrids. Lithium applies to several other defenserelated requirements. However, these two misunderstood categories likely provide the strongest demand signal.

Autonomous and remotely piloted vehicles are becoming more and more prevalent across the battlefield environment. This new breed of weapon systems participates in the air, land, sea, and space domains. Paired with artificial intelligence and advanced algorithms, new au- tonomous and semi-autonomous weapons systems continue to push the character of warfare into new directions. Within the ongoing war in Ukraine, remotely piloted aircraft like the Turkish-made Bayraktar Tactical Unmanned Aerial System have proved decisive. As with other unmanned weapons systems receiving operational use during the ongoing conflict, the Bayraktar relies on relatively lightweight, long-lasting lithium-ion batteries for propulsion and to supply power to on-board avionics, communications, and combat systems.10 Lithium-based power supplies enable extended battlefield loitering times while exposing a relatively slim operational profile. The light footprint and low heat signature of the Bayraktar make it resistant to conventional anti-aircraft and detection systems. In addition to having success in Ukraine, the Bayraktar also proved effective in Syria and the recent Armenia-Azerbaijan war.

Air-based autonomous and semi-autonomous weapons systems have taken the spotlight in recent conflicts. However, lithiumpowered capabilities are abundant across the other physical warfighting domains.

Space-based systems have long relied on lithium-ion batteries paired with solar panels. Space capabilities have been pivotal to the American way of war since the first Persian Gulf War. Unsurprisingly, space-based systems have become more capable with improvements in computing hardware and software fueled by top-end lithium-ion battery systems.

Lithium-enabled weapons have taken center stage in space and cyber domains. However, the same level of impact will soon occur in the land and sea domains. Lithium-ion battery-enabled robot combat systems like the Army’s Ripsaw autonomous combat vehicle and the Navy’s Snakehead Large Displacement Unmanned Undersea Vehicle (LDUUV) have reached the initial stages of operational fielding.11 These systems, and others like them, may prove decisive in future conflicts.

Weapons systems that function at or near the front line typically receive the most attention within defense circles.14 However, one of the essential capabilities enabled by lithium batteries includes the opportunity to construct power supply microgrids. Independent microgrids reduce and eliminate the risk associated with large power production sites. Microgrids gather and store power provided by conventional generator farms, solar panels, wind turbines, or other forms of renewable power production. In forward combat areas, microgrids enable operational resilience and reduce risk by creating the opportunity to disperse both power production and power supply. This spreading of assets makes for a much harder target.

In addition to the capability provided to forward war fighters, microgrids offer the opportunity for exceptional resiliency to the civilian sector—both in times of peace and in times of war. Microgrids have the potential to significantly limit the negative impacts from natural disasters and manmade disasters—such as a precision deep strike attack against a large power plant.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE (ESG)

While lithium offers tremendous environmental benefits by reducing—and potentially eliminating—the need for carbon-based energy, the material also offers particular environmental challenges. Extracting lithium typically involves largescale strip mines and significant quantities of water. Additionally, some skeptics have asserted that lithium is difficult to recycle and may create as many problems as it solves.15 However, the accelerating rate of global climate change may prove to be a forcing function for lithium technologies and the policies that guide the industry.

More than 95% of lithium extraction occurs in four countries: Australia, Chile, China, and Argentina.16 These countries increased lithium production in each of the last five years. However, supply continues to fall short of demand. Prospects for the long term are even worse. Planned mine expansions do not come close to forecasted requirements.

Despite the aforementioned difficulties, some hope is available regarding lithium production. A tremendous surge in lithium surveying activity is underway globally. This multipronged survey effort has achieved success and will likely continue to achieve success. New and expanded lithium reserves are being revealed on an almost daily basis. As a whole, known sources for lithium have increased by more than three times over the last three years.17 However, the efficacy of these new sites remains unproven. Further exploration and proof must occur.

Increased lithium production has advanced innovation within the mining industry. Conventional lithium extraction requires 500,000 gallons of water per ton of useable material. However, new extrac- tion techniques may enable this number to drop to almost zero.18 While getting to zero water use may ultimately prove unreasonable relevant to the associated costs, other innovations offer more in the near term. Recent research at the University of Texas hints at the potential for a low-cost method

Most lithium processing occurs in China, particularly most high-end lithium processing. The lack of diversification in lithium processing presents a substantive challenge to US security.

As supply and demand challenges across the lithium industry grow, the need for intelligent policies also increases. The US must take care in setting governance practices that enable optimal outcomes. Supply and demand must be assured, but the environment must also be protected. More lithium is needed, but failure to halt climate change is its own challenging national security problem.20

POLICY & STRATEGY

The world has changed significantly over the last twenty years—and more change is on the way. US interests benefit when national-level policies and strategies orient on the present rather than the past. However, US interests benefit the most when policies and strategies focus on both the present and the future. Currently, US policies and strategies are wholly unfocused on current and future requirements relevant to the global lithium supply. Additionally, the US approach to policy and strategy should consider both near-term and longterm needs. The US must continuously reassess and update policy and strategy to ensure optimal outcomes in concert with this approach.

of removing lithium from contaminated water.19 If proven and fielded, this new method could transform the industry.

While the distribution of lithium reserves continues to grow, the global economy’s ability to process lithium remains constrained. Most lithium processing occurs in China, particularly most high-end lithium processing. The lack of diversification in lithium processing presents a substantive challenge to US security. New processing capabilities are emerging globally. However, to date, these new sites are relatively inconsequential.

For the near term, the US should embrace three strategic lines of effort. First, the US should set policies to enable a sizable strategic stockpile of lithium. A strategic stockpile will enable the US to ride out market fluctuations more easily. Additionally, the US will be more resilient to market denial events (i.e., an event where the US is cut off from the world lithium supply by an aggressive actor or by a natural disaster). In addition to creating a strategic stockpile, the US must increase domestic production of lithium. Doing so will further reduce the risk to US interests. Finally, the US must accelerate research and development to find alternative materials to compete against and potentially outperform the current lithium-based battery market in the near term. US-funded research could enable new and separate energy storage options. Alternatively, USfunded research into energy storage technology could help make better lithium batteries—configurations requiring less lithium while providing more power.

Over the long term, the US needs to consider two lines of effort. The first is that the US must ensure that it possesses a vertically integrated lithium industry capability. Presently, no such capability exists. The US has minimal mining capacity, limited processing capacity (refining lithium into useable material), and minimal component production capacity (battery production). The US must reduce strategic risk by building and sustaining a domestic capability. The second long-term approach includes attention to US allies and key partners. Assuring that allies and partners have reliable access to lithium will reduce risk to US interest. The US way of national security relies on healthy alliances. Insecure US allies makes for an insecure US.

Conclusion

Lithium, which economists increasingly refer to as ‘the new oil,’ remains a vital resource for the US, our allies, and our strategic competitors. Modern economies, and the militaries that defend them, cannot function without stable access to lithium-enabled products. World lithium production tripled from 2011 to 2021, mainly due to production increases from China and Australia. Projections for the next ten years indicate that lithium demand will increase between seven-fold and twelve-fold. Consequently, production increases may prove insufficient for projected demand. As with oil in the 20th century, disconnects between the supply and demand of lithium may drive international behavior in the 21st century [i.e., Paraguay-Bolivia 1932, Japan-US 1941, Iraq-Kuwait 1990, etc.].

Australia, a US ally, holds the largest lithium reserve, which reduces risk to US interests. Large lithium reserves exist in several parts of South America, further reducing the risk to US interests. However, risks offset by new lithium mines in South America rebound due to the same countries having joined China’s Belt and Road Initiative (BRI). Regarding Australia, the tyranny of distance and proximity to Chi- na adds risk, especially in the event of a shooting war involving world powers. How lithium limits the surge capacity of the DIB is particularly concerning. The negative impact on the DIB’s surge capacity is a present and worsening problem that will degrade further before it can improve. Policymakers should view risk to the DIB and national security as unacceptable. US policies and corresponding strategies must quickly evolve to address the ongoing and projected challenge to the lithium supply chain and its associated negative impact on US interests. DTJ

1. Royal Society of Chemistry, “Lithium Fact Page,” ROS.com, available at: https:// www.rsc.org/periodic-table/element/3/ lithium#:~:text=Lithium%20is%20rare%20 in%20the,lithium%20minerals%20to%20 be%20discovered

2. Ibid.

3. Douwe Draaisma, “Lithium: the gripping history of a psychiatric success story,” Nature, August 26, 2019, https://www.nature.com/ articles/d41586-019-02480-0

4. Office of the Secretary of Energy, “National Blueprint for Lithium Batteries – 2021-2030,” Department of Energy, June 2021, https:// www.energy.gov/sites/default/files/2021-06/ FCAB%20National%20Blueprint%20 Lithium%20Batteries%200621_0.pdf

5. US Security & Exchange Commission, “Chemical Plat PFS Demonstrates Exceptional Economics and Optionality of USA Location,” SEC, May 26, 2020, https://www.sec.gov/Archives/edgar/ data/1728205/000172820520000018/ex99_1.htm

6. China’s domination of the lithium market is currently in decline. Most industrial countries are in the processes of expanding lithium component manufacturing. While China’s volume of production as not declined, its overall market share continues to decrease.

7. Annie Lee, “The Battery Metal Really Worrying China Is Lithium, Not Nickel,” Bloomberg, April 4, 2022 https://www.bloomberg.com/ news/articles/2022-04-04/the-battery-metalreally-worrying-china-is-lithium-not-nickel

8. Argonne National Laboratory, “Light Duty Electric Drive Vehicles Monthly Sales Updates,” November 2019, Argonne National Lab website, https://www.anl.gov/es/light-dutyelectric-drive-vehicles-monthly-sales-updates

9. Defense uses

10. Naval-Technology webpage, “Bayraktar Tactical Unmanned Aerial System,” NavalTechnology. com, January 11, 2015, https://www.navaltechnology.com/projects/bayraktar-tactical- unmanned-aerial-system/

11. Todd South, “Soldier will test Army’s new robotic combat vehicle in 2022,” Army Times, December 21, 2021, https://www.armytimes. com/news/your-army/2021/12/21/soldiers-willtest-armys-new-robotic-combat-vehicle-in-2022/ and Amit Malewar, “U.S. Navy showcases its new Snakehead unmanned submarine,” Inceptivemind.com, February 21, 2022, https:// www.inceptivemind.com/us-navy-showcasessnakehead-unmanned-submarine/23396/

12. Textron Systems, “M5 Information page,” Textron Systems, accessed April 4, 2022, https://www.textronsystems.com/products/m5

13. https://www.navalnews.com/navalnews/2022/02/u-s-navy-christens-firstsnakehead-lduuv-prototype/

14. Front line = Forward Line of Troops [ref. concepts described in Army Publication 3 & Joint Publication 3]

15. IER, “The Environmental Impact of Lithium Batteries,” Institute for Energy Research, November 12, 2020, https://www. instituteforenergyresearch.org/renewable/ the-environmental-impact-of-lithiumbatteries/#:~:text=The%20lithium%20 extraction%20process%20uses%20a%20lot%20 of,and%20pump%20salty%2C%20mineral-rich%20brine%20to%20the%20surface.

16. Vladimir Basov, “The world’s largest lithium producing countries in 2021 – report,” Kitco. com, February 1, 2022, https://www.kitco.com/ news/2022-02-01/Global-lithium-productionup-21-in-2021-as-Australia-solidifies-its-toplithium-producer-status.html

17. M. Garside, “Lithium mine production worldwide form 2010 to 2021,” Statistia, 2022, https://www.statista.com/ statistics/606684/world-production-oflithium/#:~:text=Lithium%20mines%20 produced%20an%20estimated,was%20 just%2028%2C100%20metric%20tons.

18. Robin Bolton, “Lithium mining is booming – here’s how to manage its impact,” GreenBiz, August 11,2021, https://www.greenbiz.com/ article/lithium-mining-booming-heres-howmanage-its-impact

19. UT News, “New Way to Pull Lithium from Water Could Increase Supply, Efficiency,” University of Texas at Austin, September 08, 2021, https://news.utexas.edu/2021/09/08/ new-way-to-pull-lithium-from-water-couldincrease-supply-efficiency/

20. Flavelle et al., “Climate Change Poses a Widening Threat to National Security,” New York Times, November 1, 2021, https://www.nytimes.com/2021/10/21/ climate/climate-change-national-security. html#:~:text=Intelligence%20and%20 defense%20agencies%20issued,between%20 countries%20and%20spur%20migration.

Department of Defense Strategy

Aims to Support Critical Facet of Defense Industrial Base

The United States faces unprecedented national security and economic challenges. Strategic competitors seek to displace the US military as the world’s preeminent force, the COVID-19 pandemic and impacts from climate change have exposed fragility in critical supply chains, and consolidation in the defense marketplace has undermined the competition and innovation needed to provide the best systems, technologies, services, and products to support the warfighter. These vulnerabilities especially threaten capital-strapped small businesses, which represent a majority of prime- and sub-tier defense suppliers. As part of its efforts to support this critical facet of the industry, the Department of Defense (DOD) has released its Small Business Strategy. This Strategy outlines strategic objectives that will enable the DOD to expand and strengthen its relationship with small businesses and better leverage their capabilities to help solve the Department’s and our Nation’s most complex challenges.

The Importance Of Small Businesses

panies that did business with DOD. One high-profile example is Moderna, a former small business and Defense Advanced Research Projects Agency (DARPA) grant recipient that produced millions of mRNA vaccines to help fight the COVID-19 global pandemic. Without small businesses, the vital engine of growth for the United States industrial base would cease to exist.

Small Business Challenges

Despite their importance to the Department, small businesses face various obstacles in helping DOD meet its challenges.

ness prime contracting goal for the past eight years, the number of small businesses participating in the defense industrial base has declined by over 40 percent in the past decade. Over time, a decline in the number of small businesses participating in defense acquisitions will lead to a reduction of innovative concepts, capabilities, quality of service and increased acquisition costs.

DOD ACTIONS & INITIATIVES

“Small businesses help ensure that our military has the very best capabilities to keep us safe. Some of the most innovative minds in the country come from smaller companies, and in an era of strategic competition small businesses are one of our greatest tools. Despite their significance to the defense mission, the Department of Defense has yet to utilize the full potential of small businesses,” read a message by Secretary of Defense Lloyd J. Austin III. “This Small Business Strategy outlines a Department-wide plan to harness the power of America’s small, innovative, and agile companies and grow their contributions to the defense mission.”

Through recognizing these vulnerabilities now, the Department can respond with targeted initiatives that leverage diverse small business suppliers to strengthen our domestic supply chains, reduce reliance on single or sole sources of supply, and help ensure the United States continues to lead in innovation. By adjusting to macroeconomic trends and understanding that the Department must take action to encourage more small businesses to work with the Department, DOD can implement appropriate strategies to expand use of small businesses.

It is imperative for the Department to focus on small business. These innovative companies account for 43 percent of all high-tech jobs in the US and generate sixteen times more patents than large firms. Small businesses spur innovation, represent most new entrants into the Defense Industrial Base (DIB), and through their growth represent the next generation of suppliers with increasingly diverse capabilities. Small businesses are agile and often can implement change more quickly than larger firms. In Fiscal Year (FY) 2021, small businesses made up 73 percent of all companies that did business with DOD and 77 percent of the research and development (R&D) com-

Regulations and business practices can be difficult to understand or otherwise create barriers or increase the cost of doing business with DOD. Larger, better-resourced companies are better able to navigate these obstacles and address these costs than smaller businesses. Some of these barriers include confusing points of entry into defense markets, improper bundling and consolidating of contracts, and understanding complex regulations. These barriers strain the relationship between the Department and small businesses.

In combination with economic conditions leading to a consolidating DIB, these barriers have contributed to a reduction of small businesses in the DIB. Although the Department has achieved its small busi-

Increasing small business participation in defense acquisitions is critical. Expanding participation will keep DOD at the forefront of innovation, while simultaneously fostering increased competition that can reduce costs for high quality capabilities. It will also ensure that the Department continues to leverage the untapped potential of disadvantaged-, women-, and veteran-owned small businesses that have historically been underutilized. As the Department aims to maintain the technological edge, small businesses are key. These small business efforts are a critical part of implementing the Department’s broader industrial base priorities, which directly support and align with the priorities of the President. These priorities include ensuring robust domestic capacity and capabili- ties to meet our national security challenges, promoting competition in the procurement process to benefit from improved costs, performance, and innovation, and advancing equity and inclusion in defense acquisition to leverage the unique talent and ideas that come from diverse communities from across the country. Success of implementing these priorities relies on small businesses being drivers to generate these outcomes.

DOD’S SMALL BUSINESS STRATEGY

The Department of Defense built its Small Business Strategy around three strategic objectives. First, improve management practices by sharing best practices and creating efficiencies across the enterprise for small business activities and programs. Second, ensuring that small business activities within DOD better support national security priorities. And third, strengthening the Department’s ability to engage and support small businesses. Implementing this strategy will make the DIB more innovative, resilient, and effective, producing a Joint Force that is better equipped to execute its mission.

The strategy heavily relies on the Department’s own continued push for excellence. Numerous existing small business initiatives have made incredible progress in addressing these issues. For example, the Department of the Air Force’s Open Topic Small Business Innovation Research (SBIR) and the Small Business Technology Transfer (STTR) Programs have successfully brought first time applicants into the DOD. This strategy seeks to uncover similar pockets of excellence, share best practices, develop policy, distribute guidance, and establish initiatives, as appropriate, to continue to accelerate the Department’s ability to partner with and benefit from America’s small business base.

STRATEGIC OBJECTIVE 1: Implement a Unified Management Approach for Small Business Programs and Activities

The Department’s small business programs, activities, and workforce are distributed across the Military Services, Defense Agencies, and field activities (DOD Components), including Components of the Office of the Secretary of Defense (OSD). This distribution, although beneficial in some areas, also often leads to confusion for small businesses as to what the entry points are, how programs and initiatives connect to each other, and how a small business can or should utilize DOD’s various small business programs to mature their capabilities from prototype to full-scale integration or to diversify the goods and services they provide to DOD. To address these issues, DOD will develop and implement a unified management structure for DOD small business programs and activities, develop a unified small business professional workforce, and streamline entry points, and improve small business access to decision makers.1

STRATEGIC OBJECTIVE 2: Ensure the Department’s Small Business Activities Align with National Security Priorities

National security concerns are a primary force guiding the Department’s military and defense objectives. Accordingly, national security concerns should guide the Department’s activities with respect to the small business industrial base. To build enduring advantages and get the technology we need more quickly, DOD must have access to a healthy small business industrial base with broad capabilities to produce parts and systems, secure supply chains, and access tice small businesses into the defense marketplace, while simultaneously taking into account their commercial growth objectives. The Department will ensure small business activities are carried out to further national defense priorities through efforts to stabilize and scale existing programs that help small technology and manufacturing businesses deliver capabilities to the warfighter, utilize data tools to understand and expand small business participation and spending, and expand policy and process engagement of small business professionals and senior leaders on small business matters.

To address these issues, DOD will develop and implement a unified management structure for DOD small business programs and activities, develop a unified small business professional workforce, and streamline entry points, and improve small business access to decision makers.

STRATEGIC OBJECTIVE 3: Strengthen the Department’s Engagement and Support of Small Businesses

For the Department to effectively support small businesses, DOD must improve its ability to meaningfully engage with small businesses including firms from critical socioeconomic categories and underserved communities. The Department must also ensure that its operational and acquisition leadership continues to recognize the abilities of small business to support the defense mission, and that small businesses can understand and access the Department’s most current initiatives, efforts, and policies. Furthermore, DOD should provide training and other resources to help educate small businesses and enhance their ability to resist cyber threats, IP infringement, and foreign ownership, control, or influence. These efforts help reduce the vulnerability of the DOD’s supply chain. The Department will advance these efforts through strategies to improve outreach and communication with small businesses, provide cybersecurity training and resources to small businesses, and educate small businesses. DTJ a skilled workforce. Presidential executive orders to promote competition,2 foster supply chain resiliency,3 and advance equity4 also put small business at the nexus of the nation’s economic and national security priorities. Attending to commercial trends is critical, as today’s innovative companies have many choices for capital, are not reliant on defense spending, and, therefore, have other options for how to do business. These trends may lead to adverse incentives that inhibit the Department’s ability to access America’s most innovative minds, and potentially impacting DOD’s ability to achieve national defense priorities. The Department must, therefore, take action to en-

1 Section 4901 of title 10, United States Code (U.S.C.); Section 861(b) of the William M. (Mac) Thornberry National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2021 (Public Law 116-283); Department of Defense Instruction (DoDI) 4205.01 “DoD Small Business Programs (SBP)” (August 2018); DoDI 5134.04 “Director of Small Business Programs (SBP)” (December 2017).

2 Executive Order (E.O.) 14036 “Promoting Competition in the American Economy” (July 2021).

3 E.O. 14017 “America’s Supply Chains” (February 2021).

4 E.O. 13985 “Advancing Racial Equity and Support for Underserved Communities Through the Federal Government” (January 2021).