Drastic cuts by the Department of Defense would lead to the loss of skilled workers and less investment in research and development, it said.
"The findings and conclusions of this report emphasize the critical need for government-industry dialog and partnership," said retired Lt. Gen. Lawrence Farrell, president and chief executive officer of the National Defense Industry Association.
"Especially in this time of shrinking defense budgets, government needs to communicate openly and often with industry to ensure impacts to the industrial base are deliberately managed, rather than left solely to market forces," he said.
The NDIA, together with the Aerospace Industries Association and the Professional Services Council, conducted an industry analysis last year and presented the findings of its task force to the Department of Defense.
While the task force recognized the need by the government to rein in spending, budget cuts -- especially those brought in by any sequestration mechanism -- would curtail industry innovation and its ability to meet any urgent, wartime capability needs. But PSC President and Chief Executive Officer Stan Soloway said the impacts "could be partially mitigated over time, particularly if DOD focuses heavily on 'how' it is buying and, in so doing, genuinely incentivizes the kinds of innovation that is necessary."