Need a new weapon? Contractors may not be around to build it, analysts say
Source: Lockheed Martin
September 22nd, 2011
10:30 AM ET

Need a new weapon? Contractors may not be around to build it, analysts say

By CNN National Security Producer Jennifer Rizzo

The defense industrial base is at risk of dwindling to such an extent that when the Pentagon needs a new technology in the future, there may be limited or no options for companies that can create it, according to a new report from defense budget analysts.

The defense industry does not operate like a normal free market, the analysts argue. Instead, they say, it is a highly regulated market in which the U.S. government is both the regulator and the customer, causing the contractors to rely solely on the demand of the Pentagon.

The defense industrial base wasn't created until the 1950s, and continued to maintain its presence throughout the Cold War. But with the wars winding down in Iraq and Afghanistan and budget cuts closing up the Pentagon's wallet, it's the regulator-and-customer relationship that contractors have with the Pentagon that may cause them to begin turning away from defense.

"We are left with only a handful of big prime contractors in defense...We may see some of these firms start to diversify and (sell) commercial products," defense budget analyst Todd Harrison with the Center for Strategic and Budgetary Assessments said in an interview with CNN.

"The long-term impact is the industrial base narrows down to a point that DOD doesn't have many vendors to choose from so when they try to hold a competition for a new weapons system they may only have one or two companies to build in," said Harrison

Not all areas of the industrial base are so specialized that the Defense Department wouldn't be able to find a commercial equivalent company to hire. Building trucks, for example, does not have to be done by a defense-heavy company. But other weapons systems are specialized.

"There are some things that DOD needs to acquire where there's no commercial equivalent, like a stealth bomber or a nuclear-powered ship," Harrison pointed out.

"Then you have to start considering what if in the future we have to ramp up production of a particular weapon in a war-time situation, like the MRAP (a "mine resistant ambush protected" vehicle). What if you weren't able to do that in a future conflict?" said Harrison.

Harrison and fellow analyst Barry Watts conclude that there isn't any surge or mobilization capability left in the defense industrial base.

"That means if you end up in a protracted war...or if you began suffering substantial attrition to major platforms, you've got a problem," said Watts.

In order to combat these issues Watts and Harrison say the Defense Department needs to put a strategy in place to prioritize the "key capability areas" that the Pentagon should continue to invest in despite budget cuts and a drawdown in military engagements.

"That's where you have to prioritize your efforts to make sure you don't lose critical sectors of the industrial base that you can't get back," said Harrison.

Six to 10 priorities would be a good number, according to Watts.

"If you're going to have a strategy and you're going to have 73 things you really care about, you don't have a strategy, said Watts. "Strategy is about choice".

A word of warning was given for the new secretary of defense.

"If I was Secretary (Leon) Panetta I would be concerned about...if we end up in this situation with some major combat capability areas that we really need some new stuff for example, exactly who are we going to go to?" said Watts. "The Chinese? The Russians? You don't want to end up here."

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Filed under: Defense Spending • Military • Pentagon
soundoff (3 Responses)
  1. Toby

    I have a hard time believing this.

    For one – hasn't the defense budget expanded dramatically in the last 10 years? And won't the savings from ending the existing wars mostly be drawn from things other than future weapons expenses (e.g. not having to pay to support so many active duty personnel, manage supply lines, gas for the vehicles, reconstruction funds, blah blah).

    Even after all proposed budget cuts – doesn't the US still have a larger military budget than like the next three biggest countries combined? Are we really in any danger of falling into second place, as is the implication? How would any countries with smaller defense budgets and industries really be better positioned than us as is implied?

    And finally – government is the only customer? Isn't the US the largest exporter of arms in the world?

    And what is the proposed alternative? That we just pay for more F-22 raptors that we don't need to keep our expenditures sky high in case in some future conflict down the road (if this fear hasn't been completely exaggerated) that there will be somehow be nobody capable of accepting $30 billion from the government to produce a military device, and this single theoretical military device will be the decision maker in a conflict?

    This seems like complete histrionics to me – a completely unlikely nightmare scenario. I don't mean to be one of the commentators that sounds like they have an agenda – I supported our actions against Afghanistan, and am not a pacifist – but this article seems totally unbelievable, and reeks of scare tactics used by people with a vested interest in the industry to justify giving it money instead of things that make a more immediate, tangible difference to citizens – be they education, tax reduction, health care, balancing budgets, whatever.

    September 30, 2011 at 2:02 pm | Reply
  2. Thomas McLaughlin

    The worse thing to do is cut cash from the military establishment ! Take the dough from anywhere but not our future security!! This has to be the last place to cut funds from, if anything cut the pay of our Representative,stop footing the bill on the immigrants.stop most of our so called aid to the rest of the world,stop weaving our tangled web for democracy to the world who just can`t handle it,we can`t get it right most of the time! Lets get our priority's right US first everyone else second!

    September 25, 2011 at 11:47 pm | Reply
  3. rajeev

    [youtube=http://www.youtube.com/watch?v=YVivxrlxwxI&w=640&h=390]
    The US defense budget has grown since the year 2000 by 86%, and for the fiscal year 2011 the government has requested 708 billion dollars for the Department of Defense. The debt deal that was signed in early August has already chipped away at military spending, cutting 350 billion from the Pentagon which is a start. But, if the appointed super committee can't come up an additional 1.5 trillion total in spending cuts, then the defense budget becomes a target again, with another 600 billion in cuts as part of the "trigger" mechanism.

    September 23, 2011 at 11:20 pm | Reply

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