The Pentagon, which buys and sells hundreds of billions of dollars worth of weapons every year, is changing how it conducts business. And this time, such a claim being made does seem different than many false starts in the past. The changes come amid a backdrop of growing threats and depleted arsenals, which have magnified the chronic issues of delays and cost overruns for a lot of military hardware, and long waiting lists for foreign customers.
The War Department’s revamping of how it procures and transfers weapons follows executive orders signed by President Donald Trump, who has frequently expressed his displeasure with the defense industry’s long timetables and lack of risk taking without the department footing the bill.
In January, Trump imposed new restrictions on executive compensation and threatened to cancel contracts with RTX [Raytheon] if it did not step up and invest in “plants and equipment.”
“I have been informed by the Department of War that Defense Contractor, Raytheon, has been the least responsive to the needs of the Department of War, the slowest in increasing their volume, and the most aggressive spending on their Shareholders rather than the needs and demands of the United States Military,” Trump said in a separate post on Truth Social.
Earlier this month, Trump instituted the “America First Arms Transfer Strategy” aimed at ensuring “that future arms sales prioritize American interests by using foreign purchases and capital to build American production and capacity.”
Acting on the first of these executive orders, the Pentagon last week “warned defense contractors to brace for sweeping performance reviews that will identify companies it says aren’t fulfilling their contracts,” The Wall Street Journal reported, citing a message sent to the defense industry.
“We have completed initial reviews to assess company performance as part of this executive order and will now undergo an extended period of review in which we will make noncompliance determinations,” Michael Duffey, the undersecretary of defense in charge of weapons buying, wrote in a Feb. 6 email to executives reviewed by the publication. “Following the upcoming decision period, we will be in touch with identified companies to begin remediation plans.”
Since the executive order was announced, defense companies “have been walking a tightrope trying to satisfy both Trump and their shareholders,” the Journal added. “During quarterly earnings calls late last month, executives from RTX, General Dynamics and other contractors boasted about billions of dollars in capital investments their companies have made to expand weapons manufacturing and defended dividend payouts.”
The Pentagon has also reached agreements with Lockheed Martin and RTX to expand production of munitions, the newspaper noted. It also made a $1 billion investment in L3Harris Technologies to accelerate missile production.
When it comes to selling materiel to foreign customers, Secretary Pete Hegseth on Tuesday announced he was merging two Pentagon agencies into one to speed up deliveries while bolstering American arms makers.
“Everybody wanted weapons, but we couldn’t get them to them fast enough,” Hegseth said in a video posted on X. “And today, as a demonstration of our progress on these issues, I’m proud to share that we’ve completed the realignment of the Defense Security Cooperation Agency (DCSA) and the Defense Technology Security Administration (DTSA) within our Acquisition and Sustainment (A&S) team.”
DCSA is largely responsible for facilitating the sale of U.S. weapons to partners and allies. It is also tasked with developing and planning the long-term partnerships and training opportunities that accompany those sales. DTSA identifies and mitigates risks associated with transferring technology to partners and allies.
“This realignment has created a single, coherent defense sales enterprise within the department, one that moves at the speed of war, but with the purpose of deterring aggression,” Duffey said in the X video. “Coupled with this new executive order, we’re now positioned to leverage the total aggregated global demand for U.S. weapons.”
The goal, Duffey added, is “to grow our nation’s industrial might, while maintaining the American warfighters’ technological edge” and “we’ll proactively target sales that unlock foreign investment to help power critical production lines, fueling companies to invest in new manufacturing plants, hire more engineers and create thousands of well-paying American jobs, all while better equipping our partners to share the burden of our their own conventional defense.”
Wars in Ukraine and the Middle East have placed tremendous pressure on the U.S. defense industry, which is struggling badly to keep up with the demands for both domestic and foreign customers. These wars have consumed large amounts of stockpiled weapons. Many of these munitions take years to produce, a problem exacerbated by global supply chain and procurement decisions. Those worries are exacerbated by China’s increasing belligerence and Russia’s resurgence, which has spurred a massive demand for weapons from foreign customers. An already lugubrious situation will only become exponentially worse should Washington and Beijing tangle kinetically. This would consume advanced munitions and other materiel at an extreme rate.
Amid all these challenges, the pressure is rising on the U.S. defense industry to step up its game even as it suffers ongoing cost overruns and delays. The Pentagon wants to put more of the cost-sharing burden on them to drastically increase production rates. Meanwhile, large prime contractors like Lockheed Martin, Boeing, Northrop Grumman and others are facing competition from startups like Anduril who are investing hundreds of millions of dollars in weapons development and infrastructure costs, as well as wholly self-funding development of some systems.
This is also manifesting in the Pentagon moving away from a weapon system’s original manufacturer ‘owning’ the program for its lifecycle. This situation, referred to as ‘vendor lock’ makes it impossible to compete sustainment and major upgrade contracts, for instance. Instead, the Pentagon will own the rights to the system and be able to have other companies bid on various aspects of its sustainment and upgrade throughout its service life.
“We will enable third-party integration without prime contractor bottlenecks. Success will be measured by the ability of qualified vendors to independently develop, test and integrate replaceable — excuse me, replacement modules at the component level throughout the system life cycle,” Hegseth said in November. “There’s no more complacency and no more monopolies.”
Still, though Trump and the Pentagon have taken aim at defense contractors, the War Secretary said many of these problems are also at least partially self-inflicted.
“We look at ourselves first, the way we do business,” he said in an interview following his visit to the Bath Iron Works in Maine. “We’ve been impossible to deal with – a bad customer who…year after year, changes our mind about what we want or what we don’t want, and then we make little, small technological changes, which makes it more difficult for them to produce what they need to produce on time.”
“So we have to fix our own house first, provide clarity, simplify the system, allow more people to access it [and] give that steady demand signal…”
The buying and selling of weapons is one of the greatest drivers of the U.S. economy and a critical factor in national security. Changing how the Pentagon conducts its business is a huge and fraught endeavor. How it could reshape the military industrial complex, if it succeeds at all, is yet to be fully understood. As is what exactly will happen to companies that end up on the administration’s ‘naughty’ contractor list.
Contact the author: howard@thewarzone.com