Ukraine, Taiwan Challenges Spur Efforts To Strengthen Munitions Industrial Base

Wars stimulate innovation. Fear of death or defeat makes decisionmakers more receptive to new ideas.

For instance, former British Prime Minister David Lloyd George observed in his memoirs of the First World War that, “To the infant invention of aviation, the War proved to be a forcing house of tropical intensity.”

But successful innovation in wartime usually requires more than engineering. Tactics and policy need to be adjusted to exploit the potential of technological breakthroughs. Sometimes, tactical and political innovations are sufficient to make forces more effective even in the absence of breakthroughs.

That’s what is happening at the Pentagon today. The dual stresses of conflict in Ukraine and potential conflict in Taiwan have forced a wholesale reevaluation of how the U.S. government purchases munitions and other materiel, with an eye to accelerating every facet of the process.

The urgency of military needs has merged with the Biden administration’s efforts to craft a national industrial policy, and the bureaucratic result is akin to when frozen regions begin to thaw with the coming of spring.

Industrial policy during the administration’s early months was focused mainly on the civilian economy—how to bolster competitiveness, how the speed the transition to a green economy, etc.

But with the coming of war in Ukraine, the national security establishment became much more active in developing industrial policies to overcome problems in the manufacture and delivery of military goods, particularly munitions.

The Department of Defense currently has so many initiatives in train to bolster industrial capacity and responsiveness that it is difficult for outsiders to keep track of them. For example:

• The Pentagon was granted authority by the 2023 National Defense Authorization Act to sign multiyear procurement contracts for over a dozen key munitions, a departure from the traditional practice of funding such purchases on an annual basis.
• The president’s 2024 budget request proposes to mingle multiyear purchases of diverse munitions that rely on similar components and production inputs, in a process known as Large Lot Procurement.
• The Under Secretary of Defense for Acquisition & Sustainment has established a Joint Production Accelerator Cell that aims to shift the department from reactive responses to supply-chain challenges to a more pro-active approach that promotes the use of innovations such as digital engineering.
• The Under Secretary of Defense for Research & Engineering has redirected the efforts of the department’s most prestigious advisory panel to focus on identifying and mitigating supply-chain vulnerabilities such as dependence on foreign sources of minerals and machinery.
• The defense department has begun making selective investments in key segments of the industrial base such as the fabrication of composite parts for hypersonic weapons, pursuant to authorities provided by the longstanding Defense Production Act.

These and other initiatives are receiving broad bipartisan support in Congress as lawmakers embrace the need to do business differently while the fate of Ukraine is uncertain.

Although many Republicans on Capitol Hill question the broader industrial moves being made by the White House such as stimulating the domestic manufacture of electric vehicles, they recognize there is only one customer for military goods, and that customer—the government—must therefore take the lead in shaping demand.

Thus, the congressional language explaining the need for multiyear purchase of munitions cited the need to rebuild U.S. weapons stocks, improve military readiness, provide a reliable demand signal to industry, increase overall manufacturing capacity for materiel, and optimize the timing of capital investments.

None of these reasons for multiyear procurement are new, but the willingness of Congress to move away from annual procurements signals a recognition that preserving legislative flexibility is less important today that assuring the steady flow of war supplies to U.S. forces and overseas partners.

I should note that the biggest beneficiaries of such moves to date have been Lockheed Martin
LMT
and Raytheon Technologies
RTX
, both of which contribute to my think tank.

These and other munitions makers have been accused in the past of holding back on making investments to bolster production, but without the demand signal sent by multiyear contracts, such investments would be risky business propositions. No company wants to see its new plant lying idle because the funds needed to utilize it were traded away in annual budget deliberations.

What’s remarkable about the situation today, though, is how broad-based political support is for changes in the way the government deals with the defense industrial base. It wasn’t so long ago that industrial policy (“government picking winners and losers”) was a reviled concept in some circles. For all the talk of polarization in Washington, though, the political system today seems to be much more thoughtful about how it deals with industry.

In fact, Congress is moving in bipartisan fashion to reform the foreign military sales process by which weapons are provided to overseas partners of the U.S., a much-needed initiative that will further bolster the defense industrial base.

It seems that supply-chain problems caused by the global pandemic, the rising economic challenge from China, the war in Ukraine and the threat to Taiwan have all combined to create a sea change in receptivity to industrial policy—at least where it concerns America’s warfighters.

Washington is once again learning that when war looms, novel approaches to doing business that previously looked like orphans in the political process may find an attentive audience.

As noted above, some companies benefiting from the Pentagon’s industrial initiatives contribute to my think tank.