In addition, foreign manufacturing raises quality concerns, the report said. "The presence of foreign-supplied counterfeit and defective microchips in both commercial and military products is also a widely acknowledged challenge," the report added. "Quality control becomes harder as the United States depends on more and more overseas facilities, defense contractors, and subcontractors for vital inputs."
The military uses telecom equipment in field radios, missile defense systems and unmanned vehicles, the report said. Production of mobile handsets is concentrated in a handful of countries, including China and South Korea, and networking equipment is "increasingly dominated" by Chinese companies, it said.
A rise of overseas manufacturing raises concerns about quality of the equipment, the report said. "Telecommunications supply chains are lengthy, extremely diffuse, complex, and dispersed, making it difficult to verify the authenticity of the purchased electronic equipment," it said.
The report suggested foreign telecom vendors could insert spy capabilities into their equipment. "Malicious hardware or software may be embedded in a product and used to intercept or interrupt the transmission of sensitive information," the report said. "Perhaps most alarming, is that malicious activities could potentially disrupt or disable the entire Internet by manipulating routers and switches."
The report recommended that military agencies apply existing regulations that give some domestic industries procurement preferences. The U.S. government should also develop domestic sources of key natural resources, and Congress should develop a strategy to strengthen the domestic defense industrial base, the report said.
A representative of TechAmerica, an IT trade group, questioned some of the conclusions in the report. TechAmerica has raised concerns about government procurement, but the trade group sees bigger problems with federal agencies too often buying the cheapest product instead of the better product, said Trey Hodgkins, TechAmerica's senior vice president for the global public sector.
Government agencies should focus more on quality issues and risks in their supply chains than on the origin country of the parts, Hodgkins said. "It's not where it's built, it's how it's built," he said.
Instead of focusing on country of origin, agencies should look at whether equipment is coming from a trusted vendor, he said.
Efforts to limit procurement to U.S. products don't "reflect the realities of the global economy we live in," Hodgkins said. "There are simply products that we use in the United States on a daily basis that you can't get in the United States."
In addition, efforts to significantly cut foreign procurements could lead to a trade war that hurts U.S. companies, he said.