Pentagon review calls for 'more sophisticated' relationship with industry

The Pentagon’s sweeping review of military strategy and capabilities offers a sobering assessment of the U.S. industrial base and acknowledges the Defense Department’s decades-long “hands-off” attitude towards defense contractors.

While Pentagon officials are calling for the revitalization of the defense industry in the Quadrennial Defense Review (QDR), they also warn that the Department of Defense will not “underwrite sunset industries and prop up poor business models.”

The QDR rebukes the perception that the defense industry is “a monolithic sector” of the U.S. economy, whose key players are made up of only the “select few that are established military industrial providers.” Instead, the QDR points out that the goods and services on which the Pentagon relies reach far “more deeply into the overall U.S. economy” through the web of subcontractors across the country that provide technology, components, supplies and support to the major defense contractors.

Congress Daily exclusively published the final copy of the QDR on its website Friday evening. The QDR is set to be officially unveiled on Monday.

The QDR calls for a “more sophisticated” relationship with the industrial base to take into account the rapid evolution of commercial technology as well as the unique needs of the Pentagon. The Pentagon also will rely on market forces to “create, shape and sustain industrial and technological capabilities,” but will be prepared to intervene to create and sustain competition and innovation whenever necessary.

The blueprint, however, also acknowledges the Pentagon’s shortcomings towards the defense industry.

“Unfortunately, the federal government and the Pentagon in particular have not adequately addressed the changes both within the industry and in the Department’s needs in the current strategic environment,” Pentagon officials concluded in the QDR. "The result has been that America’s defense industry has consolidated and contracted around 20th century platforms rather than developing the broad and flexible portfolio of systems that today’s security environment demands.”

The QDR also highlights the importance that the health of the financial community has on maintaining the health of the industrial base. The Pentagon needs to be more transparent so that investors can gain a better understanding about its needs and technology requirements and offer companies more access to capital.