Global supply chains were thrown into the spotlight in 2020 when Covid sparked massive disruptions. Now, focus on supply chains has taken a new shape as the U.S. shifts its priorities to cybersecurity, global competition and more.
GovCon Wire spoke with two Chertoff Group leaders — CEO and Co-Founder Chad Sweet and Michele Iversen, the firm’s newly appointed principal and head of geopolitical and regulatory risk — to learn more about how supply chains have changed in recent years and how The Chertoff Group is adapting.
Read the full Executive Spotlight interview below.
GovCon Wire: Supply chains have been in the spotlight in the last few years. Tell me about the current supply chain threats facing the nation.
Chad Sweet: I think it boils down to three components that have only continued to evolve in Washington. It’s ironic, given that we’ve just gone through an election, but there are very few issues today that are truly bipartisan because of the polarized political climate. However, supply chain security is one area that has seen broad agreement on both sides of the aisle.
If you look back from Trump 1.0 to Biden 1.0, and now to Trump 2.0, you’ll notice more continuity than change. Both sides have focused on three primary areas regarding supply chains: security, resiliency and industrial policy goals.
Security involves ensuring that we address vulnerabilities in the supply chains, particularly in the defense industrial base or what DHS refers to as critical infrastructure and key resources, or CIKR. This means preventing adversaries from exploiting hardware, software or other inputs for purposes like espionage or pre-conflict reconnaissance. It also ensures that we’re preventing adversaries from becoming our suppliers of critical technologies and supplies.
Resiliency focuses on minimizing the impact of disruptions, whether they’re caused by natural disasters or man-made events. For example, U.S. tariffs have been a major concern for government contractors. They must consider how tariffs, and the retaliatory actions from other countries, might affect their supply chains. A recent example is the Biden administration tightening export control restrictions on advanced semiconductors and fabrication equipment to China. In response, China restricted access to three critical minerals: gallium, germanium and ammonium.
This is a glimpse of what could happen in the future. Government contractors must assess not just their first-tier suppliers’ exposure to these restrictions but also their second and third-tier suppliers. The cascading effects of these disruptions could significantly impact operations. From a competitive perspective, contractors who secure alternative sources of critical minerals quickly — before demand skyrockets — can gain a significant advantage. Proactively inventorying these alternative sources can provide the resilience needed to withstand such challenges.
The third area, industrial policy goals, pertains to recent legislation emphasizing domestic content and production. For instance, the Inflation Reduction Act and other measures include “Buy American, Build American,” or BABA, requirements. Government contractors must ensure they meet these domestic production standards to comply with contracting regulations. This includes assessing whether they have sufficient domestic content to fulfill these requirements.
In summary, supply chain security today revolves around these three areas: ensuring security against adversarial threats, building resiliency to withstand disruptions and aligning with industrial policy goals to remain competitive and compliant. These priorities continue to evolve with each administration, underscoring their importance for government contractors.
GCW: What are some of the trends and opportunities you’re seeing emerge in the supply chain sector?
Sweet: For the longest time, a lot of this has been viewed as a cost center for government contractors — and, frankly, in the commercial sector as well. There’s a great risk historian who teaches at Wharton and advises the insurance industry, Nassim Taleb, who has written about black swan events, which refer to six sigma statistical anomalies. These events are happening more and more frequently.
He advocates for a concept beyond resilience. Resilience means being able to restore your operations, but his argument is that in a world with increasing black swan events, cybersecurity threats and supply chain disruptions, organizations need to adopt an anti-fragile position.
Anti-fragility means assuming you will be disrupted and not just aiming to restore operations but doing so faster than your competitors. It’s about being proactive — acting without waiting for the government to ask — and positioning yourself as the reliable partner. When competitors are down, you’re up, providing continuous support and operations. This is especially critical in the government contracting community, where contractors often deliver life-dependent services and technologies, particularly in the national security sector.
At the end of the day, organizations that adopt this mindset are leading the way. They’re not just checking boxes for supply chain compliance but actively conducting self-evaluations and participating in supply chain disruption exercises that go beyond the technical level. For example, five years ago, boards weren’t conducting cyber exercises. Now, that’s changing.
We’ve seen disruptions like the CrowdStrike incident, which impacted both government entities and numerous commercial enterprises. In some cases, one company was able to recover quickly, while another struggled. A good example was in the transportation sector. Some airlines adopted a more anti-fragile approach and gained a competitive advantage. When their competitors’ passengers couldn’t get ticketed due to disruptions, those customers turned to airlines which were able to ticket and fly. It was a recent real-world example of how being anti-fragile isn’t just about being defensively resilient — it’s about using it to go on the offense to win market share.
We’re seeing the same shift in the government contracting space. Contractors are working to make themselves more resilient and applying that knowledge to help government agencies become anti-fragile. This is particularly exciting, as these agencies often handle life-protecting missions. We’re proud to be part of that effort.
Michele Iversen: Working with companies to build product assurance into their supply chains is a significant opportunity. Supply chain issues were really highlighted during Covid, although the government had been focusing on them even before that. The pandemic exposed critical risks, whether related to resilience or dependence on countries that may choose to stop selling to us or disrupt our supply chains.
Now, we have the opportunity to help companies illuminate their supply chains and strengthen them. This includes ensuring resilience and identifying risks — whether it’s a sanctioned company, operational challenges like natural disasters or vulnerabilities from a supplier two or three layers deep in the supply chain that is not readily visible Lastly, you might think you have redundant suppliers but once you get three or four layers deep you may find that you’re single-threaded without realizing it.
By identifying these risks early, we can help companies mitigate them and build stronger product and supply chain assurance. This allows corporate leadership to provide confidence to their customers and to the government, ensuring they remain reliable and secure when needed.
GCW: How has supply chain security changed in recent years?
Sweet: I studied in Japan and went to Columbia University, where Dr. W. Edwards Deming, an industrial professor, is credited with developing Total Quality Management. TQM was a significant factor in Japan’s rise to becoming the world’s third-largest economy after emerging from the devastation of World War II.
One of the concepts associated with TQM is lean six sigma supply chain management, including the ‘just-in-time’ approach, which was widely adopted. However, as we’ve discussed, resilience isn’t just about managing manmade threats like tariffs — it also includes non-manmade challenges, like the pandemic.
The pandemic underscored the risks of geographic concentration in supply chains, such as heavy reliance on a single country like China. While few silver linings came out of the pandemic, one positive shift has been a move by corporate America and the U.S. government from a ‘just-in-time’ model to a ‘just-in-case’ approach.
This shift recognizes that while ‘just-in-case’ supply chains are less efficient and more costly than ‘just-in-time,’ they are far more resilient. Companies are now consciously building redundancy into their supply chains to ensure availability, even if it’s not always immediate.
Lastly, this ties into the broader trend of industrial policy — what I’d summarize as ‘just bring it home.’ This involves reshoring critical supply chains to the United States or nearshoring them to friendly countries.
In summary, we’ve seen a shift from ‘just-in-time’ to ‘just-in-case,’ and now to ‘just bring it home.’
GCW: Where are you seeing opportunities for expansion in The Chertoff Group’s portfolio? What new capabilities or markets are you eyeing?
Sweet: We know government contractors are working to bring ideas to the government to improve efficiency, which will be a focus for the incoming administration and its Department of Government Efficiency, or DOGE. One example involves a partnership we’ve formed with two other government contractors: SureScan, a hardware manufacturer specializing in scanning packages and passengers (such as for TSA), and Xcelerate, a highly successful government contractor across multiple agencies. Together, we’ve developed intellectual property using a technology called Massive Multiplexing, branded as Gigaplex.
Gigaplex is an exciting solution because it helps TSA manage costs more effectively. TSA recently raised its workforce’s pay to match parity with other agencies, which impacted its technology and operations budget. Gigaplex addresses this by enabling TSA to operate more efficiently. Instead of requiring a TSA officer stationed at every machine in every lane, Gigaplex securely encrypts and transmits scanned images with no latency to regional interpretation hubs, or smaller airports with more capacity during off peak times.
This technology reduces false positives and makes it faster to respond to new adversary tactics and update algorithms used for threat detection to counter emerging techniques and procedures, or TTPs. What used to take weeks or months to train the workforce on can now be updated in AI algorithms and deployed to where images are reviewed within minutes or hours. This results in safer operations, fewer disruptions and greater traveler and airline satisfaction. It’s a great example of efficiency in the travel supply chain.
The second example involves warfighting, specifically the challenge of producing enough submarines. We’re currently only producing about 1.4 Virginia-class nuclear submarines annually, despite a goal of three per year. A portfolio company of ours, ThayerMahan, was founded by the former commander of the U.S. nuclear submarine fleet and addresses this shortfall.
ThayerMahan deploys long-endurance intelligence, surveillance and reconnaissance solutions using autonomous unmanned underwater vehicles and unmanned surface vehicles. These vehicles can remain deployed for three months at a time, providing maritime surveillance for approximately $2 million per sensor. In comparison, a single nuclear submarine with one sonar and about 200 sailors costs roughly $2 billion.
This technology allows a single sailor to operate about 10 UUVs simultaneously, providing wider surveillance coverage and augmenting the capabilities of our submarine fleet. It’s a highly efficient way to support maritime operations and compensate for the gap in submarine production while still meeting mission needs.
These are two efficiency examples we’re particularly excited about: Gigaplex for the travel supply chain and ThayerMahan’s solutions for maritime surveillance.
Iversen: The product assurance playbook is a function we developed in partnership with Exiger, a supply chain illumination company with exceptional capabilities for assessing supply chain risks. Exiger focuses on illuminating supply chains and conducting a thorough risk assessment, while we step in to handle mitigation and remediation of those risks. Additionally, we assist with attaining some formal validation, whether through government or an industry certification.
This playbook is designed to drive transparency and provide a repeatable process. It starts by identifying a company’s critical products, analyzing ownership structures, evaluating supplier cyber postures and environmental risks and addressing those related risks. From there, we support the implementation of a continuous monitoring program that builds long-term trust with the government and ensures supply chain transparency and reliability.
Much of this effort stems from regulatory changes over the past two to five years. These updates have made supply chain oversight far more operational, with the government taking a deeper interest in ensuring trusted products. They want to avoid risks associated with countries of concern that could compromise our supply chain and especially within information and communications technology.
This product is particularly beneficial for companies caught in the transition of these evolving policies. For instance, some may have developed products in countries of concern when there were no prohibitions, but now they face new restrictions. Our playbook helps these companies reestablish trust and compliance.
We believe this partnership with Exiger adds great value to the community by supporting businesses in navigating these evaluations and adapting to the new regulatory landscape.
GCW: Tell me about The Chertoff Group’s work in the areas of security and growth as it relates to your federal strategy.
Sweet: We’ve really organized around two key value propositions for our clients. The first is helping the government contracting community grow, and the second is helping them secure — whether that means making themselves more secure or assisting government contractors in securing the agencies they serve.
Under our federal strategy portfolio, we’ve assembled dedicated working teams and adopted a thoughtful approach to the current transition. This involves tracking incoming leaders, monitoring likely policy developments and preparing scenarios to help our clients align their proposals with both the stated priorities of the administration and insights we’re gathering from Capitol Hill.
Additionally, given the anticipated “America First” focus, we’re actively strategizing around managing China as a competitor. Michele highlighted some of our efforts in cybersecurity and supply chain resilience, including scenarios related to tariffs. These scenarios not only assess the potential impact on businesses but also identify alternative sources of supply — ideally before their competitors can.
This proactive approach also extends to areas like energy independence, national infrastructure and deregulation across federal agencies. For example, the Gigaplex initiative is aimed at helping TSA enhance efficiency in smaller airports. It involves leveraging regional scanning technology and redeploying idle TSA officers — who would otherwise be waiting for limited airline schedules — to assist with image interpretation required for larger airports struggling to keep up with the drastic increase in flight loads.
So those are good examples of keeping things efficient. We’re very excited to be able to provide these kinds of areas of focus for our clients.
