DoD Worries: Supply Chain, Heavy Spending, Fewer Prime Contractors

The following is a summary of a conversation between Senior Bloomberg reporter Travis Tritten and Tom Temlin of Federal Drive:

It is said that over the last decade, there has been kind of this stunning decline in the number of prime vendors out there. A 36% decrease. You have also seen the defense budget climb pretty significantly. Defense spending is up 18%. And what we’ve seen is that the bottom lines of companies are growing. A smaller pool of companies are getting a bigger piece of the Pentagon’s funding pie.

We don’t have the indigenous, domestic technical ability that we need as the military adopts these cutting-edge technologies, like artificial intelligence. The military is trying to modernize and it needs this tech know-how, what you find a lot in these midsize and smaller companies, to accomplish this type of modernization. They are finding it harder and harder to get these companies on board. Therefore, it has created a system that is weak, you don’t have the technical know-how and also you have fewer companies competing for contracts. This creates challenges with the lack of competition that keeps prices down. Resulting in taxpayers paying more for these contracts.

Manufacturing is really the hard problem of the defense industrial base. You saw the last acquisition chief as she was leaving, in January, she warned about the offshoring of U.S. manufacturing, right. This is a huge long-term trend. The United States has lost a lot of these domestic abilities, these manufacturing capabilities. This is a difficult problem, because it’s much greater than just the Pentagon, although the Pentagon suffers greatly.

Biden has his deputy defense secretary in place, Kathleen Hicks, and she has mentioned that she is concerned about the consolidation of the defense industrial base. One of the issues for the Biden administration, is they do not have their top people in place yet. We’re still waiting for nominees and for a Pentagon acquisition chief to be named. That is the true point person in the department for these types of issues. It is believed at this point the administration does not have a fully executable game plan that is fully formed. This is going to be a pressing issue, and they’re going to need to get on it once they get somebody in place.

The reason that this is so concerning is because we depend on a lot of this stuff from China. And China is our main competitor, as the Pentagon always says it’s the pacing threat. When you have your main competitor in the world, who has the capability of producing this stuff, and you’re dependent on it for your defense supply chain and puts you in a really difficult situation, strategically, that’s just untenable. It’s something that needs to be addressed. There has been this rising alarm over and over of China’s involvement in the supply chain.

Author: Patrina Philips