Supporting Statement

SUPPORTING STATEMENT

U.S. Department of Commerce

Bureau of Industry and Security

National SecurityCritical TechnologyNational Security Assessment of the U.S. Industrial Base:

Defense Industrial Base Assessment Assessment: U.S. Information Network Infrastructure of U.S. 5-Axis Machine Toolthe U.S. Satellite IImaging and Sensors Industry

Section 705 of the Defense Production Act of 1950

OMB Control No. 0694-0119

A. Justification

1. Explain the circumstances that make the collection of information necessary.

The Bureau of Industry and Security (BIS), Office of Technology Evaluation (OTE)Strategic Industries and Economic Security (SIES), Strategic Analysis Division, is undertaking a national security assessment of the U.S. Information Network Infrastructure in coordination with the U.S. Department of Defense (DOD), Office of the Assistant Secretary for Defense Networks and Information Integration (DNII). is undertaking a criticald technology efense industrial base assessment of the U.S. 5-Axis Machine ToolSatellite Industry in coordination with the U.S. Department of Defense (DOD), Office of the Under Secretary of Defense (Industrial Policy)Imaging and Sensors Industry at the request of the .Assistant Secretary for Export Administration, U.S. Department of Commerce. This project was initiated by DNII to manage risk to its information and weapons systems stemming from globalization of the commercial information and communication technology market. The results of this assessment will assist DOD in safeguarding U.S. Government systems and the commercial infrastructure on which they depend (see attached letter).

The U.S. Information Network Infrastructure consists of three main segments: Terrestrial, Undersea Cable and Satellite Ground Stations. The principal goal of this proposed data collection is to quantify replacement cycles for information network equipment, document network maintenance and procurement practices, and understand issues affecting network reliability and integrity for all three segments. The effort will also identify best practices to help ensure the operational reliability of the overall national information network infrastructure. Through the successful collection and analysis of this data, DOD will have a better understanding of the potential challenges to the critical network infrastructure.

Assisting OTE in this survey and assessment are representatives from a variety of agencies and organizations including the Department of Energy National Laboratories (Sandia, Los Alamos, and Livermore), Federal Agencies (Department of Homeland Security, National Security Agency, Defense Information Systems Agency, Office of the Director of National Intelligence, and Federal Communications Commission), and Universities (Carnegie Mellon and MIT-Lincoln Labs). A number of private companies are also providing insight regarding the current status and future of the information network infrastructure (Verizon, AT&T, Hughes Satellite, Senena and Tecor)..

assessment was is being initiated

The proposed survey and assessment will assist OTE and DOD analysts in better underspstanding the current supply chains being utilized and the future challenges facing this important sector as non-U.S. sourcing network information equipment and related software begins to increase.

The final report will also assist U.S. industry and government policy officials monitor trends, benchmark performance and raise awareness of potential foreign sourcing and dependencies that could jeopardize network reliability and integrity for the entire telecommunications infrastructure.

in part, on the findings of a January 2007 Institute for Defense Analyses study of machine tools and export controls which asserted that overall U.S. machine tool global leadership has been lost (see attached letter).at the request of Under Secretary Ronald Sega, U.S. Air Force (see attached letter). Also pParticipating in this assessment are representatives from the U.S. Department of Energy, Kansas City and Oak Ridge Y-12 FacilitiesNational Reconnaissance Office, the National Institute of Standards and Technology and the U.S. Air Force., DoD National Security Space Office, NASA and the Department of State. Industry advisors to the assessment include the Association for Manufacturing Technology and the National Tooling and Machining AssociationAerospace Industry Association and the Satellite Industry Association. Both industry organizations are fully supportive of the effort. A number of 5-Axis Machine Tool companies are also assisting in the effort.

OTESIES has authority under Section 705 of the Defense Production Act of 1950, as amended,amended and Executive Order 12656, to conduct assessments and collect information from industry in support of the U.S. defense industrial base. (DPA authority was transferred from BIS/Office of Strategic Industries and Economic Security to OTE in the fall of 2006). These assessments are normally undertaken at the request of the Department of Defense, withor one or more of the Armed Services participating, or with other federal agencies., They usually focus on for national security industrial, financial and economic issues affecting concerns, specific key defense-related industrial sectorses or critical technologies. or whenever a critical defense technology is threatened. The enclosed survey questionnaire, which covers the period 2008-2010 with an out year projection2005-2008 with projections for 2009,, is the primary source of information needed for an defense industrial basenational security assessment of this type.

The information gained from the survey, which covers the 20002-20046 period, will be used to: 1- quantify and assess replacement cycles for information network equipment; document network maintenance and procurement practices; and understand issues affecting network reliability and integrity; the 2- identify best practices to help ensure the operational reliability of the U.S. national information network infrastructure; and 3- provide government and industry representatives with a comprehensive picture of this critical sector to better prepare and plan for potential challenges which could negatively affect the U.S. telecommunications sector. Imaging/Sensors industry’s health and competitiveness of the domestic 5-Axis Machine Tool industrysatellite manufacturing and supply base, and its ability to support current and future defense programs requirements (manufacturers, distributors

, and industry and government end-users).

OTESIES is the focal point for defense industrial base and critical technology analysesis among civilian Federal agencies by virtue of the above mentioned statute and executive order, which includes mandatory data collection authority to carry out these responsibilities. OTESIES has conducted approximately 420 assessments of this nature in the past 2014 15 years under various related defense industrial base programs. Assessments generally review in detail those industries experiencing employment, international competitionconomic, financial, production, investment, foreign sourcing and dependencies and other factors which may affect difficulties in their ability to support the industrial base, including defense and national security programs. The survey document is designed to collect information that facilitates this kind of in-depth analysis.

The 5-Axis Machine Tool industry has had difficulty adjusting to declines in overall U.S. manufacturing, increasing international competition, export controls, an aging workforce, and shortages of technically skilled machinists as well as lack of investment and research & development expenditures to develop world class products.

If you have any fluff to replace this fluff, I need it:

Currently, the U.S. armed forces are the primary customers for Generation II through Generation III Imaging/Sensors image devices and thermal focal plane array devices. These devices are being heavily utilized in Iraq and Afghanistan by U.S. forces. In the past few years, many commercial applications of Imaging/Sensors technology have been developed using the same technology. U.S. penetration of the worldwide commercial Imaging/Sensors market, however, has been disappointing. Some domestic Imaging/Sensors producers blame stringent U.S. export controls for their failure to make international sales. In addition, the U.S. Army and segments of the industry have raised concerns that (1) declining levels of R&D spending, (3) foreign takeovers of U.S. firms and (3) dependency of key Imaging/Sensors materials and components are detrimental to the industry as a whole.

2. Explain how, by whom, how frequently, and for what purpose the information will be used. If the information collected will be disseminated to the public or used to support information that will be disseminated to the public, then explain how the collection complies with all applicable Information Quality Guidelines.

OTESIES intends to survey approximately 90030031250 380 companiesfirms representing various segments of the U.S. Information Network Infrastructure – Terrestrial, Undersea Cable and Satellite Ground Stations. , covering not more than 5010 5-axis machine tool manufacturers/distributorsprime contractors as well as approximatelynot more than 250 350 end-users (defense and commercial) of 5-Axis Machine Tools.major suppliers of satellite parts, components, materials and servicesImaging/Sensors retailers, manufacturers, retailers, brokers and distributors, as well as component module, material, software, and other service providers. The survey is a one-time only request. While separate surveys will be sent to these two respective groups of respondents, bothThe surveys are is a one one-time only survey. Quantitative data obtained from the survey will be compiled into an aggregate database for analysis and eventual publication. This data is needed to assess trends in replacement cycles, network maintenance and procurement practices, market share, international competition, and foreign sourcing and dependencies., growth rates, industry dependence on defense markets, exports, employment, investment, research & development, and net income/profitability. The majority of the survey questions collect qualitative data, while questions asking for quantitative data been limited to reduce the burden on the respondents. The qualitative questions ask firms to describe what types of activities they are involved in (manufacturing, research and development, retail, distribution) and address issues that are critical to their specific portion of the industry.

Qualitative questions are used in some cases to complement the statistical data. The questions address the key issues of company capabilities, labor skills, exports and export controls, competitive standing, investment strategies, and industry consolidation. Using the aggregated survey data, the overall goal is to enable the private sector and government agencies government agencies to monitor trends, benchmark industry and government performance, and raise awareness of the implications regarding potential challenges to the overall U.S. information network infrastructure which could inhibit network reliability and integrity. diminishing manufacturing and R&D capabilities.

The quantitative questions collect critical metrics that will be used to assess the health and competitiveness of the SatelliteImaging/Sensors industrial base. ProductionSales, exports, employment, export controls and financial data are critical to identifying the growth or decline of these firms supporting defense and commercial markets. Capital investment and research & development data assess the ability of these defense critical firms to innovate and keep their design and manufacturing capabilities intact. A section on overall competitiveness issues will compare U.S. firms with their foreign counterparts.

Many of the questions require the respondents to place a check mark in the appropriate box, with follow-on comment sections that only require brief written responses.

3. Describe whether, and to what extent, the collection of information involves the use of automated, electronic, mechanical, or other technological techniques or other forms of information technology.

To lessen the burden on respondents, OTESIES is encouraging the firms to provide electronic responses. Each respondent will receive a personalized letter which outlines the requirements of the study and the scope of information required. T; the letter will also contain directions to the BIS website wherea Login ID and Password with which the respondent can gain access to the Excel secure online survey application. This approach was used successfully for the in a recent 2004 SIES Offsets in Defense Trade Subcontractor Industry Survey2005 Imaging and Sensors Industry, 2006 U.S. Space Industry and 2007 Defense Mission-Critical Microchip Industry Surveys2010 Encryption Products, 2010 NASA Supply Chain and 2010 Healthcare Infrastructure surveys. .All three surveys were reviewed and approved by OMB.

The statistical information requested in the survey tracks closely with the product categories and groups commonly used in the industry and verified by field-testing the OTE survey. MostMany firms and organizations will have the information computerized and will be able to retrieve it in the form requested on the survey. Other questions will require thought and perhaps discussion among several individuals for proper responses. These questions do not lend themselves to standardized computer automation. However, the questions only require brief responses in the text boxes provided.

In addition, the survey is divided into 3 major sections (with sector specific questions): (1) Distributors, Resellers, Retailers and Brokers; (2) Producers, Integrators, and Service Providers; (3) Research and Development Organization and Laboratories. This will allow ease of response by type of entity, and when combined with the electronic format, will ensure a higher than average response rate.

4. Describe efforts to identify duplication.

The information sought in the survey is unique and not available from any other source, either public or private. Some of the basic corporate background the employment data requested is submitted byfrom firms in a statistical sample to the U.S. Census Bureau. However, there is no way to ascertain from aggregated Ccensus data the employment of companies specifically involved in the 5-Axis-Machine Tool industrial base.Imaging/Sensors atellite manufacturingdefense activities. Tthe Census Bureau is precluded by law from releasing information on specific companies. Most of the questions are qualitative in nature, and therefore must be answered by corporate office personnel.

5. If the collection of information involves small businesses or other small entities, describe the methods used to minimize burden.

While the majority of tTelecommunications companies are medium and large size firms, thisThis survey willmay be distributed to a limited number ofsome small businessesbusinesses. in the 5-axis machine tool industry and related end-users., especially at least at the 2ndfirst tier of suppliers to thebcontractors to Satellite Imaging/Sensors Industryproducers. The electronic survey instrument was designed to minimize the burden on all respondents. As many manufacturers/distributors work in a narrow portion of the overall 5-Axis Machine Tool industry, a number of questions in the survey with sub-elements covering multiple products will not apply to those firms and will therefore not require a response. If for any reason the respondent cannot complete the survey in Excelonline, OTESIES will work with the respondent on an alternate form of submission. However, due tobecause of the world class status of the U.S. Ttelecommunications sectorhigh-tech nature of this industry and end-users, we are expecting almost all firms to respond electronically.

6. Describe the consequences to the Federal program or policy activities if the collection is not conducted or is conducted less frequently.

In the case of this industrial base assessment of the U.S. Information Network Infrastructurecritical technology national securitydefense industrial base assessment of , the U.S. 5-Axis Machine Tool IndustrySatelliteImaging/Sens Iors industry, athe survey is the only method available forto OTESIES to carry out its responsibilities under the Defense Production Act of 1990 1950, (as amended), and Executive Order 12656., as well as to nd respond to cooperate the requests made by the with the Under Secretary of Defense (Industrial Policy).Under Secretary of the U.S. Air ForceAssistant Secretary for Export Administration. Without the information gathered from the survey, , OTESIES could not: 1- quantify and assess replacement cycles for information network equipment; document network maintenance and procurement practices; and understand issues affecting network reliability and integrity; 2- identify best practices to help ensure the operational reliability of the U.S. national information network infrastructure; and

3- provide government and industry representatives with a comprehensive picture of this critical sector to better prepare and plan for potential challenges which could negatively affect the U.S. telecommunications sector.

fully assess the industry's health and competitiveness, understand the issues impacting exports and international markets, detail overall findings or formulate workable recommendations for the Government and other interested public and private organizationsU.S. Air Forcemy and other interested public and private organizations.

7. Explain any special circumstances that require the collection to be conducted in a manner inconsistent with OMB guidelines.

There are no special circumstances that will result in the collection of information in a manner inconsistent with the guidelines of 5 CFR 1320.6. Survey responses will contain business confidential information, which will be protected by the U.S. Department of Commerce, Bureau of Industry and Security.

8. Provide information a copy of the PRA Federal Register notice that solicited public comments on the information collection prior to this submission. Summarize the public comments received in response to that notice and describe the actions taken by the agency in response to those comments..__ Describe the efforts to consult with persons outside the agency to obtain their views on the availability of data, frequency of collection, the clarity of instructions and recordkeeping, disclosure, or reporting format (if any), and on the data elements to be recorded, disclosed, or reported.

The Federal Register notice is not applicable to this collection because it falls within the scope of the BIS blanketgeneric authority entitled, “National Security and Critical Technology Assessments of the U.S. Industrial Base,”, approved under OMB Control No. 0694-0119. This authority is renewed every three years (last renewed in 201006) to support on-going BIS defense industrial base assessment needs.

OTE staff developed the survey in consultation SIES staff has consulted with industry and government experts over a period of several months. The following is a list of those individuals who provided input and advice:persons outside the agency to obtain their views on availability of data and other issues. The survey was developed with assistance from the following organizations:

Companies

???????????????????

AssociationsCompanies

Aerospace Industry Association

…address….

Satellite Industry Association

…address….

Raytheon Commercial Infrared

ITT Industries Night Vision Division

BAE Systems

Indigo Systems (a division of FLIR, Inc.)

Northrop Grumman

Distributor/Retailer

Night Vision Optics

Government/Defense

Doug Gardner, Defense Information Security Administration – 703-882-2404

Raymond Berg, Defense Information Security Administration – 703-882-1615

Robert Runser, National Security Agency – 240-373-5085

Bill Semancik, National Security Agency – 240-373-4036

Frank Gac, Office of the Director for National Intelligence – 571-204-4377

Kevin Briggs, Department of Homeland Security – 703-235-5265

Kathleen Blasco, Department of Homeland Security – 703-235-5260

Alan Taylor - U.S. Air Force Research Laboratory, 937-522-3252

Joe Davenport - DOD Defense Supply Center Richmond, 804-279-6326

Thomas Colandene - Defense Technology Security Administration, 703-325-3518

Michael King - National Nuclear Security Administration, Kansas City Plant, 816-997-5175

George Loh – DOC, Bureau of Industry and Security, 202-482-3570

David Cammarota – DOC, International Trade Administration, 202-482-5157

Alkan Donmez – National Institute of Standards and Technology, 301-975-6618

Trade …address….

National Reconnaissance Office

…address….

National Security Space Office

…address…

.

National Aeronautical and Space Administration

…address….

U.S. Department of State

…address….

Associations

Paul Warndorf – The Association for Manufacturing Technology, 703-827-5291

Kevin King – National Tooling and Machining Association, 800248-6862

Companies

Kent Bowen, AT&T Services – 703-235-5634

Kathryn Condello, Qwest – 703-363-3990

Organizations

Celeste Matarazzo, Lawrence Livermore National Laboratory – 925-423-9838

Jim Smith, Los Alamos National Laboratory – 505-665-0921

D.V. Rao, Los Alamos National Laboratory – 505-667-4567

Fred Sexton, Sandia National Laboratory – 505-844-3927

Chuck Villamarin, Sandia National Laboratory – 505-284-8332

David Goodreau – Superior Thread Rolling Company, 818-504-3626

Newman Marsilius – Moore Machine Tool, 203-366-3224

Osval “Chip” Storie, MAG Cincinnati, 859-534-4835

my Night Vision Laboratory

Air Force Research Laboratory

Office of the Secretary of Defense

Defense Contract Management Agency Industrial Analysis Center

Defense Technology Security Administration

U.S. Department of Commerce, EA/OSTFPC/Strategic Trade Division

Associations

American Council for Thermal Imaging

National Defense Industrial Association

Academic

University of Chicago, Microphysics Laboratory

9. Explain any decisions to provide payments or gifts to respondents, other than remuneration of contractors or grantees.

This survey will not involve any payment or gifts to respondents; however, copies of the completed public version of the National Security Assessment: U.S. Information Network Infrastructure 5-Axis Machine Tool Industry assessment will be provided to the respondents upon request.

10. Describe any assurance of confidentiality provided to respondents and the basis for assurance in statute, regulation, or agency policy.

The survey and its cover letter provide assurances to the respondents that the information collected through the survey will be deemed business confidential and will be treated in accordance with Section 705 of the Defense Production Act of 1950, as amended (50 U.S.C.A. app. Section 2061 et. seq.). This section prohibits the publication or disclosure of such information unless the President determines that its withholding is contrary to the national defense. The survey will be administered and the data collected via a secure internet U.S. Department of Commerce server. Information submitted will not be shared with any non-government entity, other than in aggregate form, and the U.S. Department of CommerceCommerce Department will protect the confidentiality of such information pursuant to the appropriate exemptions from disclosure under the Freedom of Information Act (FOIA), should it be the subject of a FOIA request. OTESIES has a long and successful track record ofin protecting business confidential information collected under the above statute.

11. Provide additional justification for any questions of a sensitive nature, such as sexual behavior and attitudes, religious beliefs, and other matters that are commonly considered private.

This survey will not collect information that could be construed as being of a sensitive nature, such as information concerning sexual behavior and attitudes, religious beliefs, and other matters that are commonly considered sensitive or private.

12. Provide an estimate in hours of the burden of the collection of information.

SIES OTE estimates that the total burden placed on the respondentsU.S. 5-Axis Machine ToolSatellite Imaging/Sensors Iindustry by this U.S. Information Network Infrastructure survey effort will be approximately 12,6003,6001,8601500 hours. This is based on distributing surveys to approximately 90030031250 respondentscompanies, with an average time of 14126 hours needed to complete the survey.

This burden estimate is subject to variations among individual respondentscompanies because of differences in record keeping, organization size, and other variables. The estimate is based on the past experience of OTESIES, as well as feedback from companies and organizations that have completed our surveys. OTESIES (formerly the Office of Strategic Industries and Economic Security) has conducted surveys of various industries, including imaging and sensorsantifriction bearingshigh performance explosives, biotechnnodlogy, cartridge aund propellant actuated devicesNASA supply chain network, U.S. space industry, counterfeit electronicsspace, 5-axis machine toolsshiphipbuilding and repair, microelectronics, encryption productsstrial gears and speed changers, precision optics, artificial intelligence, advanced ceramics, and others.

The estimated total labor cost to respondents of this information collection is $441,000100,8004637,500500. This estimate was calculated by assuming athe respondents's average work rate ofis $35285 per hour multiplied by the total burden hours of 12,6003,6001,8160500.

13. Provide an estimate of the total annual cost burden to the respondents or record-keepers resulting from the collection (excluding the value of the burden hours in

#Question 12 above).

This item is not applicable because the survey questionnaire will not impose any annual costs on respondents involving capital and start-up costs or affect the costs of operation, maintenance, or purchased services costs.

14. Provide estimates of annualized cost to the Federal government.

The estimated cost to the Federal government for theto distribute the survey is $123,03976,46555,052. A major portion of this cost is related to the survey questionnaire, which includes preparation, collecting and verifying the information, and analyzing the data. Other costs will be incurred in summarizing the analysis and findings, preparing the final report, and report printing and distribution. The direct employee costs were estimated by assuming the hours spent on the project as about three-quarters one-half year equivalent, or 3926 weeks and taking three-quartershalf the annual pay of one GS-14, step 10. The direct employee cost is $102,533.63,721.

The remaining costs will be incurred in summarizing the analysis and findings, and preparing the final report. These costs were estimated by assuming the hours spent on the project as about one-quarter year, or 13 weeks pay of one GS-14, step ten, one GS-14, step seven and one GS-14, step six. The direct employee cost is $78,110. Indirect or overhead costs associated with the project are calculated as 20 percent of the direct employee cost, or $20,50612,74415,662. A review of OTESIES budgets from previous years indicates costs for building maintenance, telephone, computers, and space rental charges generally run about 20 percent of total employee costs. The total cost of the study is approximately $148,824.

15. Explain the reasons for any program changes or adjustments reported in Items 13 or 14 of the OMB 83-I.

Because the nature of this collection of information falls within BIS’s blanketgeneric authority entitled, ” “DOC/BIS National Security and Critical Technology Assessments of the U.S. Industrial Base,”, (OMB Ccontrol No. 0694-0119), there is no increase in burden hours. This Because this is the firstfifth first time BIS has used this authority in FY2011086 (with an unused balance of 24,00034,58000 burden hours a total of 74,000 authorized annually). as of 1 July 2004), aAn unused balance to the authority of of 61,40020,400232,11460 annual burden hours (74,000234,58000 minus 12,6003,600-1,860420) will remain if the assessment is approved under this authority.

16. For collections whose results will be published, outline the plans for tabulation and publication.

All data collected will be aggregated before publishing to protect company confidentiality. The surveys will be provided electronically to the 90030025310 companies in January 2011MarchMarchJuly 200846. Verification and entry of survey responses into a computer database are expected by end of August 2004. The analysis and report writing on the prime contractors will be started in April 2011, a prepared in ddraft report prepared form by the end of JuneJulyMayNovember 20110846. A prelfiminalry report of the prime contractors is planned for reviewpublication by end of December 2004/Jaunuarey 20056. The supplier base data collection will commence in June and the The final report on both the prime contractor and supplier base is planned for publication in August 2011August 2008December 2006.

17. If seeking approval to not display the expiration date for OMB approval of the information collection, explain the reasons why display would be inappropriate.

Not applicable. BIS will display the expiration date of this information collection authority on all survey and instructional instruments the public receives.

18. Explain each exception to the certification statement identified in Item 19 of the

OMB 83-I.

Not applicable.

B. COLLECTIONS OF INFORMATION EMPLOYING STATISTICAL METHODS

Not applicable.

Attachment: U.S. Department of Defense, DOD Office of the Under Secretary of Defense (Industrial Policy) Letter of Cooperation

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