Recently I had the privilege of listening to Mr. Dave Patterson, executive director, National Defense Business Institute (NDIA), lead an open forum Oct. 5 on how the national debt crisis impacts the Department of Defense and the defense industrial base.

The forum addressed the recognized and unintentional impacts of the debt debate and the critical consequences for DoD budgets and also examined the industry health index.

Patterson said: “Many fear that the health of the defense industrial base is threatened as a result of the uncertain budget cuts DoD faces. The Defense Department has the single largest budget in the federal government. Many consider its spending “discretionary”, making the Pentagon an easy target in tough financial times.”

NDIA posted a copy of his presentation as a PDF file, but I thought his slides were so good they deserved a more open presentation format that also gives each slide a well-defined Web address so they can be referenced in stories like this.

Patterson summarized his insightful analysis of debt, budget, and his Aerospace and Defense Industry (ADI) Health Index as follows:

• The debt crisis has left defense business opportunities with significant uncertainty;
• The defense budget – will certainly go down; it’s just a matter of how much and when;
• NDBI Aerospace and Defense Industry Health Index: Large companies will experience a valuation downturn of 9% and mid-size companies 34%

Other than that: Things are Looking UP!

His slides and results that I found most interesting were:

Slide 6 The Debt Crisis Context: What Difference Does it Make? – 6.6% Labor Force Reduction in Last Two Decades

Slide 10 The Debt Crisis Context: Housing Bubble Burst – Started The Problems – Of available houses, highest percentage of houses vacant in 40 years – a 43% increase since 1970.

Slide 11 The Debt Crisis Context: Business Investment Keeps Economy Viable– The New Definition of Optimism: We will go from the Lowest 5-Year Net Business Fixed Investment as a Percentage of GDP in 60 Years (1%) in 2010 to the Highest 5-Year Increase in Net Business Investment as a Percentage of GDP in 60 Years (3.4 %) – a 240% Increase by 2015 according to the Congressional Budget Office.

Slide 23 Aerospace and Defense Industry Health Index: A Financial Perspective – ADI Large companies fare the best through the downturn with only a forecast 9% decline in market valuations overall, while retaining the basis for market leadership. NDBI forecasts a 15% decline in overall ADI equity valuations over the next five fiscal years to FY2016.

In the open discussion, I asked Mr. Patterson if he thought the ADI and NDIA could use data science/data stories to better make the case for the benefits of defense spending to the public just like the healthcare industry is doing to influence the public and especially the Super Committee in their choice between social and healthcare entitlements and defense budget cuts and he agreed.

In preparation for that I applied my data science method to build the AFEI in the Cloud Dashboard since it was enticing to show below how an organization devoted to defense information integration could have its own information integrated! The American Federation of Information Integration (AFEI) is a sub-organization of NDIA.

This can be viewed in the Spotfire Web Player.