DoD: First, Do No Harm

The American defense industrial base is facing significant headwinds. I attended the Defense Industrial Base Conference (DIBCon) in Oklahoma City back in June. The conference featured numerous small and medium-sized manufacturers who do business with Department of Defense agencies and suppliers of products to the Department of Defense. Also in attendance were several agencies from the Department of Defense, National Institute of Standards and Technology, representatives from the States of Oklahoma and Texas, including Oklahoma Governor Kevin Stitt, and officials from indigenous tribes such as the Miami Nation of Oklahoma. Before the conference, I was familiar with defense industry subject matter, but what I learned there shocked me. As a former US government official and a United States Marine Corps veteran, I have seen the difficulties and costs involved in procurement. Still, I never imagined the difficulties the industry faced.

The small and medium-sized manufacturing sector supplies many parts and equipment to the Department of Defense. While the larger firms focus on the big-ticket items such as fighters, missiles, ships, and tanks, these smaller manufacturers often produce parts that the major players no longer make, or the military desperately needs small-batch production. Over the last several decades, difficulties dealing with bureaucracy, outsourcing, and industry consolidation have pushed these companies out of the defense manufacturing sector.

This one anecdote, while tragic, is not the sole source of pain in the defense industrial base. The Knudsen Institute, a 501(c)3 nonprofit organization, is led by Army veteran and defense logistics expert Michael Morford. While at the conference, I spoke with Morford, where he showed me several lists of “no-bids” on parts the US Air Force is seeking suppliers to produce (“SASPO List” then “RPOW Spares” to view current no-bids). There are currently thousands of contracts across the Department of Defense with zero bids because, as Morford assesses, they are cost-prohibitive even to bid on, and skilled labor is difficult to find. This problem is not improving anytime soon.

Michael Morford founded the Knudsen Institute to explore ways to improve the defense industrial base and procurement. According to the Knudsen Institute, “Within the DIB over the past decade, the number of small and medium-sized manufacturers (SMMs) has shrunk by over 40% and has a churn rate of 25%.” The organization researches “surge theory,” or the rapid scaling of production during a crisis. The organization’s namesake is the industrialist William S. Knudsen, the only American civilian appointed a three-star general. During the early days of the US’s entry into the Second World War, President Franklin D. Roosevelt appointed Knudsen to oversee America’s rapid expansion of armament production. The book Freedom’s Forge made Knudsen familiar to defense and industrial thinkers again in the last decade, especially with its recent inclusion on the Chief of Naval Operations Professional Reading List. The author of Freedom’s Forge, the historian Dr. Arthur Herman, spoke at the conference about the book and Knudsen and his perspective on the defense industry as an expert and senior fellow at the Hudson Institute.

The conference concluded with a video speech by former Australian Prime Minister Scott Morrison. He spoke about the importance of the trilateral security partnership between Australia, the United Kingdom, and the United States, or AUKUS. For Australia and the United States, as well as global security, the American defense industrial base must become healthier and more robust.

During this time of war in Europe, conflicts in the Middle East, tensions in the Indo-Pacific, and proxy fights in Africa, it is more important than ever that we take the “boring stuff” of defense production seriously. There needs to be a serious, top-level discussion at the Department of Defense and Congress about reforming the SBIR and defense procurement process. Offices like the Defense Department’s Office of Strategic Capital and others are fantastic tools to help fix the problems. However, chief among the complaints by these small and medium-sized manufacturers was the barrier to entry to becoming a defense manufacturer. The Department of Defense should lead with a procurement and proposal policy of first not self-inflicting harm. The Defense Industrial Base Conference is just the start of elevating the conversation to national attention.

Adam Korzeniewski is a combat veteran of the United States Marine Corps. He served in senior positions in the Treasury Department and Commerce Department. He is a subject matter expert on financial policy, trade and industrial policy, national security, and related topics. Adam can be found on X @realadamk and on his Substack at muzzlevelocity.substack.com.