Defense rejects rigid supply chain security countermeasures

Future regulations to hacker-proof the global flow of goods and services that produce military electronics must be flexible, Pentagon officials said, amid industry outcries that a forthcoming cybersecurity executive order could stifle technological creativity.

The supply chain problem is growing as contractor manufacturing lines for perhaps just one chip now comprise thousands of hands worldwide and many updates. A major concern is foreign powers, such as China, will intentionally slip trap doors into software and later remotely knock out weapons systems or steal intellectual property.

But screening for security holes and ensuring that malicious actors can’t get in are nearly impossible tasks, Defense Department officials said Wednesday.

“The defense industry and the suppliers that it is made up of are constantly changing,” said Brett Lambert, Defense deputy assistant secretary for manufacturing and the industrial base. This evolution “begs for a flexible, adaptive approach to the ever-changing reality on the ground. Outdated constructs of a static or stale industrial base, where the U.S. government could dictate certain assurances or impose inflexible rules on our suppliers, must give way to the facts on the ground that our base is no longer a single monolithic entity. Any industrial base supply chain policy must take these facts into account.”

Segregating production at each point along the chain would be largely futile, he added. Lambert’s remarks came during a panel discussion at the Potomac Institute for Policy Studies.

Building fences is “a very expensive solution. You could pursue it for a wider range of things. You would find yourself probably several billions of dollars later and several years down the road being able to manufacture a perfect 886 chip,” he said, referring to a type of microprocessor. “One of the difficulties of fencing things is you lose the access to the innovation and the commercial technology.

Dennis Bartko, special assistant for cyber at the Pentagon’s National Security Agency who also spoke at the institute, added, “you may test and evaluate at one moment, but with upgrades, changes -- the devices themselves are often morphing and changing substantially.”

The U.S. military depends on the defense industrial base, which consists of companies that make products for national security purposes, for all warfighting materials.

“At the end of the day, despite spending over a billion dollars a day, we in the Pentagon don’t actually build anything,” Lambert said. “We rely on our industrial supply chain to develop, build, and ultimately maintain the goods and services upon which our warfighters lives depend, as well as the lives of the citizens they defend.”

He indirectly acknowledged the China threat. “Also challenging is that much of our supply chain, particularly at the lower tier and in information technology, are provided by firms from countries that are not our closest allies,” Lambert said.

Creating tamper-resistant products is complicated when materials may be perfectly benign but the human being delivering them is up to no good. “It’s not just trust in suppliers of objects or things, but also those who support those things, the trust in those who might install them or maintain them as well,” Bartko said.

Congressional watchdogs are not happy with the current state of supply chain security. The Senate Armed Services Committee identified 1,800 instances of suspected fake electronic parts moving through the supply chain between 2009 and 2010, according to a May report. The number of components flagged in each of those cases surpassed 1 million, and most of the components – 70 percent – originated in China. The suspect parts turned up on mission computers for the Missile Defense Agency’s Terminal High Altitude Area Defense missile and aircraft.

In March, the Government Accountability Office announced undercover investigators had ordered military-grade parts from online portals and received back 40 price quotes for bogus part numbers -- all from vendors located in China. When the auditors asked vendors for invalid part numbers concocted by GAO, the firms sent the auditors fake parts labeled with the invalid numbers. In other words, the Chinese suppliers offered to sell parts that do not technically exist.

By law, the Pentagon must develop a supply chain strategy that ensures “items that are critical to military readiness” and prone to “disruption by factors outside the control of the Department of