Four steps the Pentagon can take to fix the munitions industrial base
As the war in Ukraine drags on, we are relearning lessons that we should never forget: Wars aren’t short, and the United States cannot and should not assume we will fight only one war at a time. By failing to retain these lessons, we run the unnecessary risk of catastrophic outcomes just to save a few dollars. In war, nations need bullets (and more) to win. Weapon systems and technology are necessary, but not sufficient to kill the enemy. In the end, something has to go “boom.”
Yet, except for Desert Storm, which was quick and “clean” for the United States, we seem to run low on munitions each time we go to war. Then, we scramble to find ways to accelerate what has become a drawn-out process that takes three years to produce a run of new munitions. Instead of scrambling when fighting begins, the Pentagon should get its act together now and take the following four actions to ensure that our warfighters, and those of our allies, have what they need to win wars.
First, eliminate the use of indefinite delivery, indefinite quantity (IDIQ) contracts with the munitions sector. This arcane contract vehicle between the Pentagon and munitions suppliers does shorten the contracting process in times of need. However, it also results in the Pentagon asking industry to produce munitions on too short of notice, resulting in the three-year lead times we see today. Instead of signing IDIQ contracts, the Pentagon should purchase munitions by committing to five-year block buys. These would put real dollars to real quantities, enabling industry to advance-purchase long lead items. With the steady flow of income, the private sector would be willing to invest in capacity.
Second, reform how the Pentagon operates munitions production facilities. The Department of Defense (DOD) owns many of these but contracts their operation out to private companies. Despite letting the private sector run them, the Pentagon treats the facilities like a military base, subjecting them to government-mandated rules and regulations that then get baked into the cost of the munitions. These fixed costs drive up the price of munitions and, in a cost-constrained environment, cause a quantity death spiral as fewer rounds are affordable. The government should simply pay for these overhead costs out of pocket.
Next, the Pentagon should stop “contracting-to-monopoly.” Over the past several decades, the Pentagon has driven manufacturers out of business by awarding large, single manufacturer contracts under the misbegotten belief that this is an efficient and effective way to procure items. Most of those not awarded contracts go out of business, leaving the supply chain vulnerable and allowing costs to increase. In the mid-2010s, the Army successfully used the Medium Caliber Family acquisition strategy to protect and strengthen the U.S. industrial base by maintaining two capable producers. While this may not be the most cost-efficient contracting method in the short term, it provides an insurance policy to rapidly ramp up production and control costs in the long term.
Finally, the most important step the government can take is to set a realistic stockpile requirement. In order to save money and appear ready for a fight, the military has set its required levels to what would be a very short war. This disregards the fact that wars often go on longer than expected and can draw in other adversaries who may open a second front. It also disregards the needs of our allies who will require munitions. A realistic stockpile requirement would enable us to fight two wars and provide what our allies need. It would also allow Congress to better allocate funding to ensure that the industrial base is resilient and responsive.
Given the Pentagon’s strategy of planning for only one war, we are going to have to buy a lot more munitions. In fact, we should at least double spending on munitions for the next five to 10 years — and we should do so by committing to five-year block buys that will lock in the sustained funding that industry needs to invest in workforce development and industrial production. Setting up a mechanism for our NATO and Asian allies to contribute funding into a stockpile from which they can draw is another way to pool resources and reduce risk.
Very little in war is more problematic than running out of bullets. Our arsenal of democracy cannot produce what is needed if we suppress the demand signal and cut the funding. Ordering industry to produce more now, without giving much warning ahead of time, is not working today — and certainly will not work if we’re in a war. Fortunately, the solutions aren’t rocket science and DOD can fix this in its 2024 budget submission, which is only a few months from being sent to Congress.
Retired Army Maj. Gen. John Ferrari, a nonresident senior fellow at the American Enterprise Institute, is a former director of program analysis and evaluation for the Army.
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