BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 1

U.S. Department of Commerce Bureau of Industry and Security Office of Technology Evaluation

U.S. C-17 Aircraft Supply Chain Impact Assessment

Final Results November 2018

Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 2 Who We Are:

• Bureau of Industry and Security (BIS)

Mission: Advance U.S. national security, foreign policy, and economic objectives by ensuring an effective export control and treaty compliance system and promoting continued U.S. strategic technology leadership  Develops export control policies  Issues export licenses  Prosecutes violators to heighten national security  Develops and implements programs that ensure a technologically superior defense industrial base

• Office of Technology Evaluation (OTE)

Mission: OTE is the focal point within BIS for assessing the capabilities of the U.S. industrial base to support the national defense and the effectiveness of export controls

Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 3

OTE Industry Surveys & Assessments Background:

• Under Section 705 of the Defense Production Act of 1950 and Executive Order 13603, ability to survey and assess: Economic health and competitiveness Defense capabilities and readiness

• Data is exempt from Freedom of Information Act (FOIA) requests

• Enable industry and government agencies to: Share data and collaborate in order to ensure a healthy and competitive industrial base Monitor trends, benchmark industry performance, and raise awareness of diminishing manufacturing and technological capabilities

Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 4 OTE/OEA C-17 Project Overview

• Partnership with the U.S. Department of Defense, Office of Economic Adjustment (OEA), and in coordination with the City of Long Beach, to conduct a comprehensive survey and assessment of the C-17 aircraft supply chain industrial base

• Three Phase Project: • Phase I: C-17 Excess Tooling and Equipment Transfer Completed - 2015 • Phase II: Survey Development and Industry Deployment • Phase III: Survey Compliance and Final Results

Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 5 What is the C-17 Globemaster III Aircraft? C-17 Aircraft Program

• The first C-17 production model was delivered to Joint Base Charleston, S.C. on June 14, 1993

• The USAF capped its C-17 fleet at 223 aircraft; its final delivery was on 12 September 2013 • Notable C-17 Missions  Operation Allied Force  2010 Earthquake Humanitarian  Operation Iraqi Freedom Relief  Operation Enduring Freedom  2011 Pakistan Flood Relief

Achievements of the C-17 Program • The C-17 Globemaster III is the most flexible to enter the force • The C-17 flew half of the strategic airlift missions in the Kosovo and Operation Allied Force • The C-17 was awarded U.S. aviation's most prestigious award, the Collier Trophy, in 1994

Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 6

C-17 Aircraft Production by Year

18

16

14

12

10

8

6

4 Number of C-17 Aircraft Number of 2

0

USAF (UK) Royal Australian Air Force Canadian Armed Forces Qatari Emiri Air Force NATO Strategic Airlift Capability UAE Air Force Air Force Boeing Storage

Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 7 Phase II: Survey Development and Deployment

• Survey Development and Outreach

• Develop survey data collection topics such as production, employment, financials, R&D, and competitive outlook

• Conduct initial site visits to better understand the impact of the loss of C-17 aircraft sales on the industrial supply chain

• Design, develop, and circulate the draft survey template for feedback from select organizations

• Survey Approval

• Formally field test final version of C-17 aircraft supply chain survey

• Obtain Office of Management and Budget (OMB) C-17 aircraft survey approval

• Survey Deployment

• Format and code approved survey template

• Distribute survey to all identified C-17 aircraft suppliers

• Conduct respondent compliance to ensure quality and timely data analysis

Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 8 Methodology - C-17 Aircraft Assessment

• Organization size was established based on sales from C-17 related products manufactured in the U.S. • Small: Under $10M in annual sales • Medium: $10M-$50M in annual sales • Large: Over $50M in annual sales

• BIS received responses from over 420 organizations, representing 544 facilities. Organizations were categorized by business type: • Distributor • Engineering Firm • Non-Profit • Holding Company • Research & Development Firm • Laboratory • Service Provider • Testing Facility • Manufacturer

Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 9 Methodology - C-17 Aircraft Assessment

• Scope of survey and assessment was limited to organizations with U.S. operations that supported the C-17 program

• OTE used a list of suppliers provided by the prime contractor and combined it with an internal list, which was accumulated through previous Defense Industrial Base studies and other suppliers identified by C-17 supplier organizations

• Survey exemption requests were handled individually and The Boeing Company was consulted on some cases

• If Boeing and the USAF was not a customer since 2012 and the respondent’s products/services were generic, an exemption would be provided

• Respondents that had Boeing and/or the USAF as a customer since 2012 but were unaware of specific C-17 support were NOT provided an exemption generally

Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 10

Type of Supply Chain Support Self-Identified Support of C-17 Program by Type and Time Period (1991-2018)

Both 149 Former and 38 58 53 Current Total

142 Former 47 78 17 Total

85 Current 36 37 12 Total Time Period of Support (1991-2018) Time 0 20406080100120140160 # of Respondents

Direct Only Indirect Only Both Direct and Indirect

QRP, A1 376 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 11 Primary Customer: USAF or Boeing Primary Customers for Known Support of C-17 Program

291

46 and USAF Boeing Only Both Boeing 10% of respondents did not list Boeing or USAF as a primary customer 39 Primary Customer Primary

6 USAF Only Other

0 50 100 150 200 250 300 350 # of Respondents QRP, A1 382 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 12 Respondent Profile Type of Support to USAF or Boeing Boeing Only Both Boeing and USAF Other USAF Only

95 17 4

91 7 17 2 Type of Support of Type

63 47 1 Indirect Indirect Direct Both Direct and

0 20406080100120140 # of Respondents

QRP, A2 344 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 13 Respondent Profile Primary Customers of Suppliers to Boeing and USAF

Boeing 251

Both 71 72% of all primary customers surveyed were suppliers to Other 19 Boeing Primary Customer Primary

USAF 6

0 50 100 150 200 250 # of Respondents QRP, A2 347 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 14 Support of C-17 Program Suppliers of USAF or Boeing with C-17 Support

71, Former 17%

Current 189, 45% 82, 19% Has Never Supplied to USAF or Boeing Both Current and 78, Former 19%

QRP, A2 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 15 Respondent Profile Involvement with the Maintenance, Repair, and Overhaul of C-17 Program by Time Period and Primary Customer

283 with MRO Never Involved

38 12 8 Boeing and Former

Both Current Never Involved with MRO

Both

31 14 2 3 Other Time Period of Involvement Time USAF

23 2 Former Current

0 50 100 150 200 250 300 # of Respondents QRP, A3 416 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 16 Small Business Qualifications Does Your Business Qualify as any of the Following Types?

Types of Business Small Business 194 8 (a) Firm 4 197, 217, 48% HUBZone 17 52% Minority-owned 26 Woman-owned 48 Veteran-owned/service-disabled veterans 15

Several respondents qualified for more than one of the drop downs

194 out of 420 respondents identified as a small Yes No business

Q1a, C 414 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 17 C-17 Facility Support Number of Facilities That Have Supported C-17 Program By State

California 191 Missouri 29 Washington 22 New York 21 Texas 21 Georgia 21 Out of 518 facilities, 191 or 45% of Florida 21 C-17 Facilities are located in Ohio 17

State California Kansas 15 Arizona 14 Most respondents had at least 1 Illinois 14 facility that supported the C-17 New Jersey 11 Program Connecticut 11 Michigan 8 Oklahoma 8

0 50 100 150 200 250 # of Facilities 420 Respondents Q1b, B Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 18 Business Functions With C-17 Support Number of C-17 Respondents By Type of Business Function

Manufacturer 238 39 15

Engineering 69 16

Distributor 57 7 3

Service Provider 52 9 4

Testing Facility 27 4

Research & Development 18 9 Business Function

Laboratory 12

Holding Company/Headquarters 5 0 50 100 150 200 250 300 350 # of Respondents Both Other Aircraft Only C-17 Only Q1c, B 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 19 Types of Company Restructuring per Year Mergers, Acquisitions, and Divestitures from 2012-2017

2008-2012 1 10 2

2015 accounted for 2013 1 8 1 30% of all recorded restructuring 2014 1 15 5 Year 2015 3 33 9

2016 1 21 8

2017 2 16 8

0 5 10 15 20 25 30 35 40 45 50 # of Financial Activities

Mergers Acquisitions Divestitures Q2, A & B 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 20

Acquisitions, Divestitures, and Mergers Primary Objectives 60

50 “Other” responses include 49 48 buyouts, equity restructuring, 40 40 and portfolio shaping 30

20 18 10 # of Financial Activities # of Financial 12 12 4 3 2 5 0

Objective Q2, A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 21 Joint Ventures Per Year Joint Venture Activities from 1999-2017

1999-2012 22

2013 1 27% of joint ventures were with Chinese companies. The majority of these respondents’ joint ventures 2014 2 were to expand customer base and seek new business opportunities 2015 3 Year

80% of those with joint ventures 2016 2 with Chinese companies were classified as distributers 2017 0

0 5 10 15 20 25

# of Joint Ventures

Q2, A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 22 Products and Services Top Products and Services Provided

Primary Business Line Additional Business Line

U: Raw Materials and Purchased Parts 141 58 A: Airframe - Forward, Center, and Aft Fuselages 64 59 V: Material Processing/Finishing 46 25 W: Testing, Evaluation and Professional Services 23 33 G: Hydraulic Systems 16 27 F: Fuel Systems 13 34 X: Aircraft Servicing, Repair and Overhaul 10 50 T: Cargo Compartment and Crew Accomodations 10 26 B: Airframe - Wings 8 99 E: Engine Build-Up Assembly and Nacelle 8 41 S: Environmental and Oxygen System 7 30

K: Landing Gear, Braking System and System 6 37 Respondents had 24

Product and Service Category Product and Service Category D: Vertical Stabilizer 42 choices (A-X) to list their product and services C: Horizontal Stabilizer 37 I: Auxiliary Power Unit Systems 31 0 50 100 150 200 250 # of Respondents

Q3, A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 23 Primary Business Lines Top 5 Out of 24 Business Lines

U: Raw Materials/Purchased Parts 405 22 71

A: Airframe: Fuselages 401 24 36

B: Airframe: Wings 249 26 33

V: Material Processing/Finishing 80 73 24 Product and Service Product and Service Category X: Aircraft Servicing, Repair and 31 48 38 Overhaul

0 100 200 300 400 500 600 # of Respondents Product Service Both Q3, C-E 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 24 Program Participation Number of Federal, State, and Local Programs Supported Since 2012

80

70

60 30% of respondents 50 support more than 10 Federal, State, 40 74 and Local programs

30 59 61 # of Respondents

20 38 37 34 27 10 23 17 4 9 3 333 2 5 550 5 0 0 1-10 11-20 21-30 31-40 41-50 >51 # of Federal, State, & Local Programs Large Companies Medium Companies Small Companies Q4, A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 25 Program Participation Revenue Attributable to Federal, State, and Local Programs 70

60

50 Nearly 60% of respondents noted that Federal, State, and 40 Local programs account for 20% or less of total revenue 30 62

# of Respondents 20 37 27 10 21 19 19 17 13 15 2 11 12 12 10 11 0 0 6 6 4 4 0 0% 1-10% 11-20% 21-30% 31-40% 41-50% >50% % Revenue

Small Companies Medium Companies Large Companies Q4, B2 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 26 Program Participation Top Federal, State, Local Customers Since 2012 by Support Type

All other DoD Operations 155 136 50

U.S. Air Force 122 98 25

Non-Defense USG 41 30 11 84% of respondents supported DoD related 2 6 Customer Type programs State/Local Government 8 16% of respondents supported Non-DoD Intelligence Community (non-DoD) 1 related programs

5 4 0 50 100 150 200 250 300 350 400 # of Respondents

Indirect Support Both Direct Support Q4, B3 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 27 USG Programs Support Top 10 Products/Services Supported through USG Work

U24 - Other Purchased Part 170

U11 - Fasteners 83

F4 - Other Fuel System 82 769 Total Products G4 - Other Hydraulic System 78 and Services

U4 - Castings and Forgings 76

V6 - Other Material Processing/Finishing 69 “Other” responses include Searchlights, Control U9 - Connectors 57 Actuation, and Hardware

Products and Services Consumables among other M4 - Other Guidance, Navigation and Control 54 miscellaneous products

U1 - Aluminum Sheet/Plate/Rod 51

U19 - Switches 49

0 50 100 150 200 # of Respondents Q4, C 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 28 USG Program Support Top 10 DoD Programs Supported

Boeing (Chinook, Apache, etc.) 156

Lockheed Martin F-35 Lightning II 155

Boeing (McDonnell Douglas) F/A-18 Hornet 140

Bell Boeing V-22 Osprey 139

Lockheed C-130 Hercules 136

Boeing F-15 Eagle 132

USG Program Boeing KC-46 101

Lockheed Martin F-22 Raptor 97

Boeing P-8 Poseidon 95

Sikorsky Helicopter (MH-53E Sea Dragon, Black Hawk, etc.) 91

0 20 40 60 80 100 120 140 160 180 # of Respondents Q4, C 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 29 USG Program Support Top 3 Primary Products/Services Supported by DoD Program

U24 - Purchased Part Boeing Helicopter (Chinook, Apache, etc.) 17 7 7

Lockheed Martin F-35 Lightning II 12 9 7 F4 - Fuel System

Boeing (McDonnell Douglas) F/A-18 9 7 5 Hornet G4 - Hydraulic System

Bell Boeing V-22 Osprey 13 7 7 U11 - Fasteners Lockheed C-130 Hercules 9 7 7

U4 - Castings and Forgings Boeing F-15 Eagle 11 5 5 USG Program Boeing KC-46 7 5 6 U9 - Connectors

Lockheed Martin F-22 Raptor 12 6 M4 -Guidance, Navigation and Control Boeing P-8 Poseidon 7 5 6 A6 - Center Fuselage Sikorsky Helicopter (MH-53E Sea Dragon, 8 6 5 Other/Boeing Part Number Black Hawk, etc.) starting with 17B2, 17N2 and 17P2 0 10203040 # of Respondents Q4, C 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 30 USG Program Support Top DoD Programs Supported and C-17 Termination Impact

Boeing Helicopter (Chinook, Apache, etc.) 131 15 7 2

Lockheed Martin F-35 Lightning II 132 12 11

Boeing (McDonnell Douglas) F/A-18 Hornet 121 11 7 1

Bell Boeing V-22 Osprey 115 11 12 1

Lockheed C-130 Hercules 115 10 7 2

Boeing F-15 Eagle 111 12 8

USG Program Boeing KC-46 86 9 6

Lockheed Martin F-22 Raptor 82 7 8

Boeing P-8 Poseidon 85 5 5 Sikorsky Helicopter (MH-53E Sea Dragon, Black Hawk, 82 45 etc.) 0 20 40 60 80 100 120 140 160 180 # of Respondents No Change Unknown Negative Impact Positive Impact Q4, C 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 31 Sales and Customers Average Sales Per Year 2012-2016

$45

$44 $44.0 $44.0

$43 $42.6 $42 $41.5 $41 Average total sales $40 increased by 13.5% from $ in Millions $ in 2012 to 2016 $39 $38.8

$38

$37

$36 2012 2013 2014 2015 2016 Year Q5, A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 32 Sales and Customers Aggregate Sales Per Year: 2012-2016

$200 $185.7 $180 $183.4 $181.0 $173.7 $160 $153.9 $140

$120 Total sales increased $100 by 20% from 2012 to

$ in Billions $ in $80 2016 $60

$40

$20

$0 2012 2013 2014 2015 2016 Year Q5, A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 33 Sales and Customers Aggregate U.S. and Non-U.S. Sales: 2012-2016

$180

$160 $158.7 $156.2 $159.8 $150.7 $140 $134.1 $120 Between 2012-2016, Non-U.S. sales $100 grew by 31% $80

$ in Billions $ in U.S. sales grew by 19% $60

$40

$24.7 $24.8 $25.9 $20 $19.8 $23.0

$0 2012 2013 2014 2015 2016

Year Non-U.S. Sales U.S. Sales Q5, A-B 396 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 34

Average Percentage of Attributable Sales Broken Down By Category: 2012-2016

70%

63% 64% 64% 64% 64% 60%

Revenue streams can be accounted for in more 50% than one production category

40% 37% 37% 36% 36% 35% 30% % ofSales

20%

13% 13% 13% 14% 14% 10% 6% 6% 5% 3% 3% 0% 2012 2013 2014 2015 2016 Year C-17 Non-US Defense Aircraft Q5, B-E 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 35 Sales and Customers Estimated Direct Customers Per Respondent: 2012-2016

• 420 respondents supported an estimated 433,000 direct customers

• The average respondent supported 182 direct customers • Only 77 respondents reported over 1,000 direct customers • 57% (44) of these respondents were categorized as distributers

Q5, A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 36 Type of Customer Supported Number of Respondents By Type of Customer 2012-2016

Government Government Non-Defense, Defense, 325, 13, 1% 11% Other, 52

Commercial, 2585, 87% Other Customers, 39, 1%

Q5, B 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 37 Type of Aircraft Supported Number of Customers By Aircraft Supported: 2012-2016

C-17 only, 42, 1%

C-17 and other aircraft, 320, 10%

1.3% of identified

Unknown, 503, 16% customers were exclusively involved with C-17 production Other aircraft only, 2328, 73%

Q5, B 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 38 Sales and Customers Top 15 Non-U.S. Customers by Country 2012-2016

Canada 91 70 59 Germany 26 Brazil 26 Japan 23 South Korea 16 Sweden 13 Out of 445 Non-U.S.

Country 13 customers, 35% or 156 Israel 11 are attributable to Ireland 8 European Union members Turkey 8 Taiwan 8 Netherlands 7 Mexico 7

0 102030405060708090100 # of Respondents Q5, B 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 39 C-17 Termination Impacts Due To The Termination of The C-17 Program 2012-2016

Gained Customers, 8, 2%

Lost Customers, 63, 15% 15% of respondents lost customers due to the termination of

No Effect/Neutral, the C-17 program 349, 83%

Q5, C 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 40 Pre-Termination Business Model Respondents’ Most Recent Year of C-17-Related Activities

250

The spike in 2017 can be attributed to 208 200 spare parts, repairs, maintenance, and repurposing for foreign orders of the C-17 aircraft 150 Domestic production of the C-17 aircraft ended in 2013 100 # of Respondents

50 51 37 30 16 15 16 7 0 3 Pre 2000 2000-2012 2012 2013 2014 2015 2016 2017 2018 Year Q6, A1 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 41

C-17 Production by Company Size What type of businesses were involved in the C-17 Aircraft Supply Chain?

Approximately 30% of Small, 130, companies involved in C-17 31% Large, 158, 38% aircraft production were small businesses

Medium, 132, 31%

Q6, A1 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 42 C-17 Termination Notification Was your organization notified in advance of the C-17 aircraft program termination?

Unknown, 25% of respondents were 133, 32% Yes, 185, not notified of the 44% termination of the C-17 program

No, 102, 24%

Q6, A1 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 43 C-17 Termination Notification Source of Notification of the Termination of C-17 Production

“Other” - respondents commonly indicated

Other, 29, 16% they were notified by Boeing, 155, 84% either lower-tier customers or the media

USAF, 1, 0.54%

Q6, A2 185 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 44 C-17 Termination Business Transition Did the termination of the C-17 program change your organization's involvement in the defense industry?

Not Applicable, 21, 5% How was your participation in the defense industry affected?

Reduced Involvement in Defense 49 No, 343, 82% Yes, 56, 13% Increased Involvement in Defense 3

Left Defense Industry 4

Total: 56

Q6, B1 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 45 C-17 Termination Business Transition Did the termination of the C-17 program change your organization's involvement in the aerospace industry?

Not Applicable, 23, 5% How was your participation in the aerospace industry affected? Reduced Involvement in Aerospace No , 364, 87% Yes, 33, 8% 24

Increased Involvement in Aerospace 7

Left Aerospace Industry 2

Total: 33

Q6, B2 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 46 C-17 Termination Business Transition Did your organization substitute your C-17 sales with a new or different program?

Haven't Platform for C-17 sales substitutions Tried/Don't Know, 118, 28% USG 21 Yes, 193, 46% Commercial 60

Both USG and 112 No, 109, 26% Commercial

Total 193

Q6, B3 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 47 C-17 Termination Business Transition Commercial Platforms Used as Substitute for C-17 Program

Boeing Commercial Jets/Aircraft 149

Airbus Commercial Jets/Aircraft 78

Other Small Aircraft 66 “Even still, these platforms haven't been much of a Other Commuter Aircraft (Bombardier DHC-8, Embraer 145, 58 Commercial Platforms etc.) substitute. We don't do near the volume we did with C-17.” Other Transport Aircraft (Illyushin ll-96, Bombardier Cseries, Small Business etc.) 30 -

0 20 40 60 80 100 120 140 160

# of Respondents Q6, B4 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 48 C-17 Termination Business Transition Top 15 DoD Platforms Used as Substitute for C-17 Program

Lockheed Martin F-35 Lightning II 76 Bell Boeing V-22 Osprey 35 Boeing F/A-18 Hornet 33 All Other DoD 28 Lockheed C-130 Hercules 27 Boeing Helicopter (Chinook, Apache, etc.) 27 Boeing F-15 Eagle 27 Boeing KC-46 20 Boeing P-8 Poseidon 16

USG Platform Bell Helicopter (AH-1 SuperCobra, UH-1, etc.) 14 The top 15 out of 37 Sikorsky Helicopter (MH-53E Sea Dragon, Black Hawk, etc.) 13 categories Other - Drone 13 accounted for 28% Other - Cargo/Transport 9 of total substitutes Northrop Grumman E-2 Hawkeye 9 Lockheed Martin F-22 Raptor 7 0 1020304050607080 # of Respondents Q6, B4 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 49 C-17 Termination Lessons Learned Did your organization adjust its business plan in response to the C-17 Aircraft program's termination?

Unknown, 19, 4%

Not Applicable, 25, 6%

Yes, 57, 14% 14% of organizations adjusted their business plans due to the C-17 programs termination

No, 319, 76%

Q6, C1A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 50

C-17 Termination Lessons Learned Leading Actions Used for Business Plan Alterations After C-17 Termination

Other 31

Reorganization 18

Retraining of Employees 18

Strategy Repurpose of Equipment 14

“Other” frequently included laying Liquidation of High Value Assets 7 off employees and adding more facilities in foreign countries

Increased Investment 7

0 5 10 15 20 25 30 35

# of Respondents Q6, C1B 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 51 C-17 Termination Lessons Learned Self-Scoring of Organizations’ Response to C-17 Termination

250 61%

200 Many companies were unaware of project termination while working on 150 the C-17 program

236 100

# of Respondents 18% 16% 50 70 5% 60 20 0 Managed with significant Managed with only minor Handled Moderately Well Handled Well difficulties difficulties Organization Responses Q6, C2 386 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 52 C-17 Termination Lessons Learned Leading Advice for Vendors Experiencing the Loss of a USG Program

350

300 “Less concentration of customers and products 250 offers less risk.” Other responses include: -Small Business 200 providing transition assistance, and providing “Try to implement a balance 150 earlier notice of termination 301 of commercial work with multiple defense programs.” 100 -Large Business # of Respondents 50 “Find other programs, sell, 7 32 41 sell, sell.” 0 -Small Business Increase Other Reduce Diversify Minimum Buys Dependency on USG Leading Advice

Q6, C3 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 53 C-17 Termination Lessons Learned Supplier Advice for Government and Defense Prime Contractors when Handling the Closure of a Program

250

200 206 “Consumables bought 187 for one government aerospace program 150 “Due to the lead times for raw should be able to be materials, earlier notice of the used on others.” cancellation would have prevented us - Large Business 100 from buying raw material for the C17 Program.”

# of Respondents -Medium Business

50 60 53 14 25 0 Assist with the Provide Other Provide Transition Facilitate/aid in Recognition/Award identification of more/earlier notice Assistance to requalification for Service new substitute MRO phase programs Leading Advice Q6, C4 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 54

Full Time Equivalent Employment Average Number of FTE Employees Reporting at the Corporate and Division Level from 2012-2017

300

250 252 254 254 248 244 246

200 64% of respondents reported FTE Employment at the Corporate/Whole 150 Organization level

# of Employees 100 95 92 92 85 91 90

50

0 2012 2013 2014 2015 2016 2017 Year Business Unit/Division FTEs Corporate/Whole Organization FTEs Q7a, A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 55 Full Time Equivalent Employment Average FTE Employment by Company Size 800 74 73 73 711 700 691 694 699 694 72 671 71 600 70

500 68 68

400 66 65 300 64 64 240 223 237 226 236 200 213 62

100 60 # Of Employees (Small Businesses)

0 58 2012 2013 2014 2015 2016 2017 # Of Employees # Of Employees (Medium and Large Businesses) Year

Medium Large Small

Q7a, A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 56 Full Time Equivalent Employment Aggregate FTE Employment by Company Size

23,000 3,250

22,500 22,432 3,200 3,189 22,087 22,000 3,174 3,156 21,757 21,500 3,150 21,230 3,136 21,000 21,090 3,100 20,643 20,561 20,500 20,590 20,310 20,356 3,080 3,050 20,000 19,877 19,658 3,016 19,500 3,000

19,000 2,950 18,500 Businesses) (Small # Of Employees

# Of Employees # Of Employees (Medium and Large Businesses) 18,000 2,900 2012 2013 2014 2015 2016 2017 Year

Medium Large Small

Q7a, A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 57 FTE Employee Work Designations Average Percentage of Defense, Aircraft, and C-17 Related Employees from 2012-2017

80%

70% 67% 65% 65% 66% 67% 67% 60%

50%

40% 41% 41% 41% 41% 41% 41%

30% Employees can be categorized by more than

% % of Related Employees 20% one field

10% 10% 10% 9% 8% 7% 7% 0% 2012 2013 2014 2015 2016 2017 Year % of Defense Related Employees % of Aircraft Related Employees % of C-17 Related Employees

Q7a, A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 58 Full Time Equivalent Employment Primary Business Line Full Time Employment Averages 2012-2017 1200

1000 979 998 935 930 935 927

800 773 782 762 744 755 752

600 582 582 568 587 482 506 500 450 442 400 404

# of Employees 359 360

200

0 2012 2013 2014 2015 2016 2017 Year

Manufacturers Distributors Services Engineering Q7a, B 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 59 Workforce Operations Primary Business Operation Lines of Employment

2.6

Distributor 28.6 25.7 30.3 6.3 10.9 2.7

2.6 3.3

Services 43.8 18.2 7.7 13.5 12.3 2.2

2.4 2.7

Manufacturing 52.3 15.6 5.5 10.5 11.1 1.6 Business Operation 3.4 4.2

Engineering 44.2 15.3 6.4 15.9 9.6 2.0

2.2 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% % of Employment Machinists Admin Marketing Engineers Testing/Support Design Facility/Maintenance IT

Q7a, B 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 60 Difficulties Hiring and Retaining Workforce Workforce Difficulties Stratified by Occupation

70 66 60 60 54 52 50 48

40 35

30 24 25 21 21 21 18 20 18 20 16 17 16 15 11 # of Respondents 9 10 9 10 66

0

Workforce Difficulties

Hiring Retaining Both

Q7a, B 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 61 Impact of C-17 Termination on Workforce Respondent Self-Identified Impact Severity on Workforce

Change Un-Related to C-17, Respondents indicated layoffs, reduction in 41, 10% benefits, reduction in overtime, and forced time off as the leading workforce impact they experienced

Minimally Negative, 47, 11% Some large companies indicated that the C-17 termination allowed Negative, 42, 10% them to reallocate resources to new Neutral/No Impact, 290, business opportunities, and to 69% develop new technological advancements to replace losses in employment

Q7b, A1 Source: U.S. Department of Commerce, 420 Respondents Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 62 Workforce Preservation Plan Do you have a workforce preservation plan for the post C-17 environment?

“We have additional contracts to Not Sure, 71, sustain the “Headcount is 17% workforce.” adjusted -Large Company commensurate with sales volume to No, 216, maintain profitability 51% “[We implemented] required by our Yes, 133, redeployment to investors.” 32% project work for other -Large Company customers, including non-aerospace customers.” -Large Company

Q7b, A2 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 63 Implemented Workforce Modifications Changes Made In Response to C-17 Termination

16

14 “Other” included layoffs of 14 personnel 12 12 92 of 420 respondents 10 indicated they made changes to their 9 8 workforce

6 # of Respondents 4 4 3 2 2

0 Repurpose Other Retraining Reduction in USG Automation Outsourcing Trained personnel Workforce Modifications Q7b, A3 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 64 Loss of Critical Skills/Capabilities Broken Down by Product or Service Line

Product or Service Losses Indicated

Airframe: Forward, Center 3 and Aft Fuselage Testing, Evaluation and 1 Professional Services

Engineering Expertise 1

374, 89% Flight Control Systems 1 35, 8% Fuel Systems 1 5, 1% Machining 1 4, 1% Unknown 38 2, 1% Total 46

No Loss Unknown Yes - Aircraft-related Yes - Both Yes - Non-aircraft-related

Q7b, A4 Source: U.S. Department of Commerce, 394 Respondents Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 65 Developmental Work With Outside Institutions Respondents’ Indication of Work with Outside Institutions on Development/Training

“[We] work with local colleges on employee skills “We visit training.” classrooms, host - Large Business interns, host Yes, 178, 43% MFGDAY, contribute to No, 232, 57% school programs and equipment.” -Medium Business “[We conduct] thorough outreach of Colleges, Trade Schools, High Schools and Veterans/Disabled/Minority groups.” -Large Business

Q7b, B1 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 66

Developmental Work With Outside Institutions Participation Broken Down by Business Size

Small, 37 Total Participation With Outside Institutions

Large, 88 56% of Large 40% of Medium 28% of Small Businesses Businesses Businesses

Medium, 53 42% of all businesses participated

Q7b, B1 178 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 67 Workforce Development Programs Participation in Workforce Development Programs

250 225

200 182

149 150 128 127 107 100 71

# of Respondents 51 50 34 10 11 13 2 7 8 4 0

Workforce Programs Current Participation Past Participation Q7b, B2 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 68 Workforce Development Programs Developmental Programs Deemed Most and Least Useful Among Respondents in Post C -17 Transition

40 35 35

30 25 25 23 21 20 19 18 15 16 15 15 14 13 11 11 12 12 12 10 9 10 9 10 7 8 7 4

# of Respondents 5

0

Developmental Programs

Very Useful Somewhat Useful Not Useful

Q7b, B2 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 69 Critical Vendors & Suppliers Total Supplier Support

• 1,307 unique suppliers supported 420 respondents

• The top 15 most cited suppliers only accounted for 7% of all supplier support

• 97% (1,267) of all identified unique suppliers are considered domestic

Q8, A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 70 Critical Vendors & Suppliers Suppliers by Country

Canada 9 United Kingdom 8 France 7 Germany 6 Japan 5 Israel 5 3 Mexico 3 India 3 Taiwan 2 420 respondents

Country Sweden 2 were supported Singapore 2 by a total of 62 China 2 Spain 1 Non-US suppliers South Korea 1 Malaysia 1 Ireland 1 Cameroon 1 012345678910

# of Suppliers Q8, A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 71 Critical Vendors & Suppliers Suppliers by Top 15 State

California 459 Pennsylvania 66 New York 61 Ohio 60 An estimated 1,307 unique suppliers supported 420 Washington 52 respondents Illinois 49 Missouri 47 California accounts for 35% of all Texas 46 identified vendors and suppliers State Florida 34 Connecticut 31 Respondents could list multiple New Jersey 27 suppliers Massachusetts 25 Georgia 25 Arizona 25 Michigan 24

0 50 100 150 200 250 300 350 400 450 500 # of Respondents Q8, A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 72 Critical Vendors & Suppliers Top 10 Supplier Input Categories

Raw Materials and Purchased Parts 1,113

Material Processing/Finishing 259

Testing, Evaluation and Professional Services 56

Airframe: Forward, Center and Aft Fuselage 28

Aircraft Servicing, Repair and Overhaul 28 Over 70% of identified Electrical Power System 23 suppliers provide raw materials and purchased Input Category Fuel Systems 22 parts

Flight Control Systems 18

Landing Gear, Braking System and Loadmaster System 17

Communication and Recording Systems 16

0 500 1000 1500 # of Respondents Q8, A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 73 Critical Vendors & Suppliers Top 5 Supplier Input Product/Service Areas

U24 - Other Purchased Part 360

U23 - Other Raw Material 181

U1 - Aluminum Sheet/Plate/Rod 118 Other Purchased Parts include Hydraulic Systems, and Switches

V6 - Other Material Processing/Finishing 103 Product/Service Areas Other Raw Materials include Castings & Forgings, and Composites V1 - Coating and Painting 87

0 100 200 300 400 # of Respondents Q8, A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 74

Supplier Association With C-17 Program Number of Respondent Suppliers Associated With C-17 Program

C-17 Specific, 127, 8%

8% of 1,661 identified suppliers were exclusively

C-17 and other involved in C-17 Unknown, 637, 38% aircraft, 897, 54% specific operations

Q8, A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 75 Supplier Impacts Impact of C-17 Termination On Domestic Supplier Shut Downs

Only one respondent indicated that one or more of their suppliers ceased operations following the termination of the C-17 program. Both suppliers were located in California. Both sold raw materials and purchased parts.

“Less income. Had to lay off long time employees.” -Small Business

Q8, B 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 76 Operating Profit Margin Average Operating Profit Margin Across Small, Medium, and Large Businesses 2012-2016 16% 15.4% 15% 14.3% 14.2% 14% 13.7% 13.9%

13% 13.1% 12.6% 12.7% 12.7% 12% 11.6% 11.5% 11% The average operating

10% profit margin was 12.7% across all business sizes 9.8% Operating Profit Margin 9% in 2015

8% 7.4% 7% 2012 2013 2014 2015 2016 Year Small Business Medium Business Large Business Q9 396 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 77 Financial Risk Levels Number of Companies and Financial Risk Level 400 362 357 356 350 350 341 Financial Risk calculation based primarily on profit margins, debt 300 levels, liquidity

Reasons for lack of measurement: 250 Source data mismatches (e.g. 200 reporting income statement data at the facility level and balance sheet 150 data at the corporate level) # of Respondents 100 Unavailable or missing data (e.g. no 67 assets or sales listed, newly formed 54 45 49 business) 50 42 13 12 5 6 10 4 10 6 9 3 0 2012 2013 2014 2015 2016 Year

Low/Neutral Risk Moderate/Elevated Risk High/Severe Risk Insufficient Data Q9 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 78 Financial Risk Levels Company Sizes for Overall Financial Risk Status 2012-2016

140

120 117 108

100 93 25% of all respondents were 80 financially categorized as moderate/elevated or high/severe risk 60 # of Respondents 40 31 26

20 13 10 9 5 6 0 2 0 Low/Neutral Risk Moderate/Elevated Risk High/Severe Risk Insufficient Data

Large Medium Small Q9 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 79 Financial Impacts Self-Assessed Financial Impacts Experienced Due To The End of C-17 Program

No Change 267

3 respondents indicated that the C-17 program’s closure had a positive effect on their business Negative Impact 102 Negative Impacts:

“Loss of revenue and jobs.” Unknown 48 -Medium Business Financial Impact “Stock (inventory) became obsolete.” -Small Business

Positive Impact 3 “Unable to pay back loans.” -Small Business

0 50 100 150 200 250 300 # of Respondents

Q9, C1 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 80 Financial Risk Level vs. Financial Impact Financial Impact Due To Termination of C-17 Program According To Financial Risk Levels 250

218

200

150

100 # of Respondents 63

50 34 34 26 6 8 0 0 1 1 2 0 High/Severe Risk Moderate/Elevated Risk Low/Neutral Risk Financial Risk Positive Change Unknown Negative Impact No Change Q9, C1 393 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 81

Financial Risk Level vs. Financial Impact High/Severe Risk and Moderate/Elevated Risk Companies

High/Severe Risk Commonalities: High/Severe Risk, 7 6 out of 7 Respondents have known C-17 support and all production is aircraft-related Primary business line is manufacturing

Locations in different states, Only 2 are in California

Majority small businesses

Moderate/Elevated Risk, 69 Moderate/Elevated Risk Commonalities:

Majority large businesses

44% stated C-17 termination had a negative impact on their business

Q9, C1 76 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 82 Capital Expenditures Reporting Number of Respondents with Capital Expenditures 2012 - 2016

No Capital 26% (110) of Expenditures, 110, 26% respondents had no capital expenditures

Capital Over 50% (55) Expenditures, 310, 74% with no capital expenditures were small businesses

Q10, A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 83 Capital Expenditures Average Capital Expenditures 2012-2016

$1,600

$1,462 $1,400 $1,300 $1,239 $1,200 $1,139

$1,000 $949

$800 Average Capital Expenditures $600 $ in Thousands $ in increased by 54% from 2012 to 2016 $400

$200

$0 2012 2013 2014 2015 2016 Year Q10, A 310 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 84 Capital Expenditures Average Capital Expenditures Broken Down By Allocation

60%

55.0% 54.7% 53.0% 53.9% 50% 50.5%

40%

30% 26.1% 26.8% 26.7% 26.2% 26.9%

20% % of Capital Expenditure Capital of %

10%

2.7% 2.4% 2.5% 1.7% 1.4% 0% 2012 2013 2014 2015 2016 Year C-17 Related Defense Related Aircraft Related Q10, A 310 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 85 Average of Attributable Capital Expenditures Broken Down By Allocation

$900 $799 $800 $700 $700 $681 $604 $600

$500 $479

$393 $400 $331 $341 $306 $ in Thousands $300 $248

$200

$100 $25 $27 $30 $23 $20 $0 2012 2013 2014 2015 2016 Year C-17 Defense Aircraft Q10, A 310 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 86 Reduction of USG Defense Spending Impact of Reductions In USG Defense Spending on Capital Expenditures

Negatively Impacted, 34, 8% 16 of the 34 respondents who were negatively impacted are small business enterprises.

“We had no reason for growth. We just Unknown, 88, 21% needed to survive, and we have so far. -Small, Moderate/Elevated Risk Business

Not Impacted, 298, “From 2013 through 2015, there was little 71% need for more equipment as government procurement was flat.” -Medium, Low/Neutral Risk Business

Q10, B 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 87 Use of 3D Printing for Obsolescence Number of Respondents Utilizing 3D Printing To Manage Obsolescence Issues and Aircraft Program Applicability

No Obsolescense Issues, 54, 13% General Aircraft Related, 68, 16%

Other, 77

No, 289, 69%

Not Aircraft Related, 9, 2%

Q10, C 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 88 General 3D Printing Capabilities Number of Respondents With 3D Printing Capabilities 2012-2016

Unknown 22 5% Only 7 of the 65 respondents with 3D printing capabilities experienced a decline in aircraft-related capital Yes 65 expenditures due to a reduction in USG 16% defense spending

None of the 65 respondents who have 3D printing capabilities are classified as high/severe risk companies No 333 79%

Q10, C 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 89 3D Printing Top 10 3D Printing Product/Service Categories

Testing, Evaluation and Professional Services 16

Raw Materials and Purchased Parts 12

Material Processing/Finishing 9

Communication and Recording Systems 4

Fuel Systems 4

Propulsion Systems 4 Respondents were asked to list up to two products or

Product/Service Engine Build-Up Assembly and Nacelle 4 services which have 3D Flight Control Systems 3 printing capabilities

Emergency Systems and Fire Detection 2

Airframe: Forward, Center and Aft Fuselage 2

0 2 4 6 8 1012141618 # of Respondents Q10, C 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 90 3D Printing Top 5 3D Printing Product/Service Areas

U24 - Other Purchased Part 5

W9 - Engineering Services 2 Other Systems/Services listed cover a wide array of product and service areas W10 - Other Testing Service 2 Examples include:

Flight simulators, interior lighting F4 - Other Fuel System Product/Service Areas 2 systems, aircraft and engine level fuel components, component testing, and prototyping

L6 - Other Communication and Recording 2

0123456 # of Respondents

Q10, C 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 91 Research and Development Percent of Respondents That Conduct R&D

152 of the 420 respondents (36%) Small 14% 18 respondents indicated that they conduct research and development

Medium 33% 43 respondents Company Size Company

Large 58% 91 respondents

0% 10% 20% 30% 40% 50% 60% 70% 80% % of Respondents Q11, A1 152 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 92

Research and Development Would Your Organization Conduct R&D if the U.S. Government Provided Funding?

Small 30% 66% 4%

Medium 41% 58% 2% Company Size Company

Large 44% 51% 5%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% % of Respondents Yes No Yes but not aircraft-related Q11, A1 152 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 93 Research and Development Average Small Business R&D Expenditures 2012-2016

$1,400

$1,200 $1,218

$1,046 $1,058 $1,000 $978

$800 Small Business R&D $721 Expenditures have $600 increased by 47% from

$ in Thousands $ in 2012 to 2016 $400

$200

$0 2012 2013 2014 2015 2016

Year Q11, B1 18 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 94 Research and Development Average Medium Business R&D Expenditures 2012-2016

$8

$7 $6.7

$6

$5.2 $5 $4.9 $5.1

$4 $4.0 Medium Business R&D $ in Millions $ in $3 Expenditures have increased by 29% from $2 2012 to 2016

$1

$0 2012 2013 2014 2015 2016

Year Q11, B1 43 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 95 Research and Development Average Large Business R&D Expenditures 2012-2016

$97 $96.7

$96 Large Business R&D Expenditures have increased by 5% from $95 2012 to 2016

$94 $93.7

$93.1 $93 $92.9 $ in Millions $ in $92.4 $92

$91

$90 2012 2013 2014 2015 2016

Year Q11, B1 43 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 96 Research and Development Average Annual R&D Expenditure By Area of Research 2012-2016

70%

65% 60% 63% 64% 64% 60%

50%

40%

34% 35% 30% 34% 34% 34%

20% % % of R&D Expenditures 10%

2% 2% 2% 1% 1% 0% 2012 2013 2014 2015 2016 Year

C-17 Defense Aircraft Q11, B2-4 152 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 97 Research and Development Average R&D Expenditure By Area of Research and Company Size 2012-2016

90% Medium Businesses 80% 74% Large Businesses 70% 70% 63% 60% 64% Small Businesses 50% 45% 42%

40% 36% 40% 41% 31% 30% 32% 33% % % of R&D Expenditures 20%

10%

6% 2% 0% 0% 2% 2% 0% Defense Aircraft C-17Defense Aircraft C-17Defense Aircraft C-17

2012 2016 Q11, B2-4 152 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 98 Research and Development Top R&D Funding Sources 2012-2016

Internal/Self-Funded 135 49

DoD 12 16

U.S. Industry 4 14 1 “Our equipment can be applied to commercial Other 17 as well as aircraft part construction, so our R&D efforts are equally applicable to both segments.” Other USG 5 -Large Business

State and Local Government 2 R&D Funding Source R&D Funding

Universities 1

Non-U.S. Investors 1

0 50 100 150 200 # of Respondents Primary Funding Source Secondary Funding Source

Q11, C1 152 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 99 Research and Development Top Aircraft-Related R&D Funding Sources 2012-2016

Internal/Self-Funded 98 27

DoD 9 12 Approximately 72% of respondents that conduct R&D utilize their primary

R&D Funding Source R&D Funding source of funding for

U.S. Industry 3 11 aircraft-related activities

0 20406080100120140

# of Respondents Primary Funding Source Secondary Funding Source Q11, C1 152 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 100 Security Expenditures Average Aircraft-Related Physical and Cyber Security Expenditures

$4.0

$3.5 $1.8 $1.7 $3.0 $1.5 $1.5 $1.6

$2.5

$1.0 $2.0

$ in Millions $ in $1.5

$1.0 $1.6 $1.6 $1.5 $1.7 $1.3 $1.4 $0.5

$0.0 2012 2013 2014 2015 2016 2017

Cyber Security Expenditures Physical Security Expenditures Q12, A 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 101 Security Expenditures Average Small Business Cyber and Physical Security Expenditures

$7

$6 $5.8

$5

$4 $4.1 $3.6 $3.4 $3 $2.8 $ in Thousands $ in $2 $2.1

$1 $0.9 $1.0 $0.7 $0.8 $0.7 $0.7

$0 2012 2013 2014 2015 2016 2017 Year Cyber Security Expenditures Physical Security Expenditures

Q12, A 130 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 102 Security Expenditures Average Medium Business Cyber and Physical Security Expenditures

$30

$25 $23.9

$20 $18.1

$15

$12.2

$ in Thousands $ in $10 $10.0 $7.8 $6.1 $5 $4.8 $3.8 $3.0 $2.5 $2.4 $2.6 $0 2012 2013 2014 2015 2016 2017 Year Cyber Security Expenditures Physical Security Expenditures Q12, A 132 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 103 Security Expenditures Average Large Business Cyber and Physical Security Expenditures

$350 $324.1 $300 $288.7 $280.2

$250 $238.6

$200

$159.3 $150 $ in Thousands $ in $100 $86.5 $69.9 $73.0 $69.8 $66.6 $50 $56.0

$0 2012 2013 2014 2015 2016 2017 Year Cyber Security Expenditures Physical Security Expenditures Q12, A 158 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 104 Cyber Security Policies Cyber Security Policies in Place for All Respondents

Restrict IT Priviliges to Specific Employees 96.0%

Inventory of Authorized and Unauthorized Software 78.8%

Inventory of Authorized and Unauthorized Devices 78.1%

Maintain, Monitor, and Analyze Audit Logs 77.1%

Security Policy Security Written Protocols for Security Breach 67.6%

Annual Cybersecurity Training Requirement 60.7%

Two-Factor Authentication 35.2%

% of Respondents Q12, B 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 105 Cyber Security Policies Cyber Security Policies in Place By Company Size

Under 50% 50-75% 75-100% Small Medium Large

Restrict IT Priviliges to 98% 99% 89% Specific Employees

Inventory of Authorized 86% 87% and Unauthorized 62% Software Inventory of Authorized and Unauthorized 65% 80% 87% Devices

Maintain, Monitor, and 55% 80% 93% Analyze Audit Logs

Cyber Security Measures Security Cyber Written Protocols for 43% 67% 89% Security Breach

Annual Cybersecurity 36% 56% 85% Training Requirement

Two-Factor 24% 33% 46% Authentication

0% 100% 0% 100% 0% 100% % of Respondents Q12, B 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 106 Cyber Security Policies Cyber Security Policies in Place By Company Size

Under 50% 50-75% 75-100% Small Medium Large

Restriction Against Non 80% 80% 71% U.S. Storage of CSI

Data Exfiltration 54% 67% 71% Safeguards

Encrypt CSI Transmitted 44% 64% 77% Externally Cyber Security Measures Security Cyber

Encrypt CSI in Storage 34% 50% 53%

Encrypt CSI Transmitted 27% 34% 56% Internally

0% 100% 0% 100% 0% 100% % of Respondents Q12, B 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 107 Outreach and Assistance Effectiveness of Assistance from Outside Organizations

Federal Government 2 2 1 State and Local Government 2 4 1 1 Other 3 5

Both Government and Industry 8 3 4 1

Type of Organization of Type Non-Profit 4 14 9

Industry 41 43 15 3

0 20406080100120 # of Respondents

Very Effective Somewhat Effective Neutral Not Useful

Q13, B 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 108 Outreach and Government Programs Top 10 Government Programs selected by Organization’s Interest

Market Expansion/Business Growth 19.0%

Cybersecurity 17.9% Contrinuous Improvement/Lean 17.6% Manufacturing

Government Procurement Guidelines 13.3%

Export Licensing (ITAR/EAR) 13.3%

Supply Chain Organization 12.9%

Quality Management and Control 11.7%

Government Program ITAR: International Traffic Vendor/Material Sourcing 10.7% in Arms Regulations EAR: Export Technology Acceleration 10.0% Administration Regulations

Design for Manufacturability 8.8%

0% 5% 10% 15% 20% 25%

% of Respondents Q13, C 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 109 Organizational Challenges Top 15 Organizational Challenges

Healthcare 144 55 43 Domestic Competition 118 52 66 Labor Availability/Costs 124 49 47 Worker/Skills Retention 108 58 28 Aging Workforce 105 45 23 Foreign Competition 90 51 23 Taxes 65 74 18 Aging Equipment, Facilities, or Infrastructure 73 47 24 Reduction in USG Demand 68 51 8 Government Regulatory Burden 59 61 5 Qualifications/Certifications 60 50 11

Organizational Challenge Cybersecurity 43 60 13 Government Purchasing Volatility 49 38 25 Environmental Regulations/Remediation 43 61 4 Export Controls/ITAR & EAR 46 44 11 0 50 100 150 200 250 300 # of Respondents

Other Ranked Concern Unranked Concern Primary Concern Q14 420 Respondents Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED BIS/OTE C-17 Aircraft Supply Chain Impact Assessment 110

BIS/OTE Contact Information

Brad Botwin Erika Maynard Director, Industrial Studies Special Projects Manager (202) 482-4060 (202) 482-5572 [email protected] [email protected]

Trade and Industry Analyst: Moriah Phillips Research Fellow: Jean Thompson

Alexander Werner Marina Gayed Research Fellow Research Fellow (202) 482-4615 (202) 482-7980 [email protected] [email protected] Intern Support: Andrea Garcia, Caela Mandigo, Christopher Whittle, Emily Festa, Fahmiya Ismail, Ian Kearns, Lily Shultz, Ormond Derrick, Sagar Sharma, William Helfrich

U.S. Department of Commerce, Bureau of Industry and Security HCHB 1093, 1401 Constitution Avenue, Northwest Washington, D.C. 20230 http://www.bis.doc.gov/DIB

Source: U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation. UNCLASSIFIED