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April 03, 2025 Revitalizing the U.S. Defense Industrial Base for Future Great Power Conflict By: Becca Wasser and Philip Sheers The U.S. defense industrial base (DIB) is strugglingto meet the demands

April 03, 2025

Revitalizing the U.S. Defense Industrial Base for Future Great Power Conflict

By: Becca Wasser and Philip Sheers

The U.S. defense industrial base (DIB) is strugglingto meet the demands of the current strategic environment—let alone prepare for a potential conflictagainst an advanced adversary such as China. Today,the DIB cannot keep pace with defense modernizationefforts while also filling the massive demand for defenseitems in Ukraine, the Middle East, and the Indo-Pacific.It is struggling to simultaneously meet the current needsof the U.S. military and America’s allies and partnerswhile preparing for future challenges. The chasmbetween U.S. defense strategy and defense industrialreality has been exposed. Without significant industrialreform, the United States is at risk of being unable todeter China and Russia from aggression today and, ifneeded, win a future great power conflict tomorrow.

Despite the renewed importance of industrial policyto U.S. economic and national security, the DIB is besetwith chronic challenges. Decades of defense-industrialconsolidation, inconsistent government demand,and bureaucratic rigidity have made the U.S. DIB morevulnerable, less capable, and slow to react. The DIBlacks the capacity to produce enough of the right kindsof capabilities to roll back adversary aggression andprevail in future conflict. It does not possess the responsivenessand flexibility to dynamically and swiftly surgeproduction of a diverse array of weapons and platformsin times of crisis. The DIB also lacks the resiliencerequired to withstand global shocks and the strainof modern conflict.

The United States needs a different DIB than it hastoday if it wants to deter and prevail in future greatpower conflict. This report aims to bridge the gapbetween U.S. defense strategy and industrial planning tostrengthen deterrence. It details the existing challengeswithin the U.S. DIB before illustrating how it is insufficientto manage the future dynamics of great powerconflict. The report makes the case for improving theDIB by emphasizing four core defense industrial attributes:capacity, responsiveness, flexibility, and resilience.

To meet the demands of future great power competition,the DIB must significantly expand its capacityso that it can produce the volume of critical weapons,platforms, and equipment needed to deter and defeatincreasingly challenging and complex threats. The DIBalso must become considerably more responsive so thatit can surge production of key items at decisive momentsand rapidly fill critical gaps. The diversity of systemsrequired to address emerging threats, from low-costattritable drones to submarines, requires the DIB tobecome more flexible so that it can support the high-lowcapability mix of future conflicts. Finally, the DIB mustbolster its resilience to external disruption so that itssupply chains can withstand interference, manipulation,and other shocks likely to arise in conflict.

Reforming the DIB around these attributes will not bewithout significant time and financial cost. However, thecost of inaction is far greater. As currently organized, theU.S. DIB risks undermining deterrence today and undercuttingU.S. strategic objectives in future competition andconflict. Without change, the U.S. DIB may put Americaat risk of failing to win a war against China, and the DIBis likely to increasingly become a critical strategic vulnerabilityto U.S. security and leadership.

The U.S. DIB must be reformed so that it better servesU.S. interests, strengthens deterrence, and ensuresAmerican and global security today and tomorrow.

The Department of Defense (DoD) should expandproduction of priority systems and establish an advisorygroup to help identify the relevant capabilities ripe forgreater production. Congress should appropriate therequisite funds to enable expanded production of thecapabilities needed for great power conflict.

The DoD should grow its use of multiyear procurement(MYP) and block-buy contracting to supportsteadier demand over time and enable cost savings.Joint portfolios of common weapons systems such asprecision-guided missiles and joint enablers can furtherstabilize demand. Congress should approve additionalMYP and block-buy funding requests.

The DoD should expand its use of undefinitized contractactions to enable industry to begin work while contractnegotiation is still being finalized. Options contractsshould be employed to enable greater surge production.Congress should establish a Critical MunitionsAcquisition Fund to strengthen munitions inventoriesand establish similar funds to bolster reserves of otherin-demand items.

Extra capacity requires manufacturing facilityspace, materials stockpiles, and workforce availability.Defense Production Act Title III authoritiesand congressional appropriations should provideincentives for reserve facility space and stockpiles.Industry should maximize fungible productionlines while government regulatory processes shouldadapt to enable flexible manufacturing and fasterproduction timelines. Congress and industry shouldwork together to create economic incentives for newworkforce entrants through national service initiativessuch as AmeriCorps.

The DoD should increase overall inventories, replenishdiminished materials, and include new materials in theNational Defense Stockpile. Congress should providebudget authority for new stockpile acquisitions andfund domestic materials development research toensure continued U.S. access to and onshoring of keymaterials. Congress also should authorize specialcontracting measures for the advanced procurementof long-lead items shared across different programs orfamilies of systems.

The DoD should encourage industry to adopt newand alternative manufacturing approaches, includingthose from the commercial sector, to expand and surgeproduction while also creating greater efficiencies andcost savings. The department should reform regulationsthat hinder the adoption of new manufacturingtechniques and reduce its risk aversion in testing andevaluation.

The department should award production contracts tobuild production capacity outside of the prime contractorsand should selectively encourage “dual-sourcing”acquisition. The DoD also must reform acquisitionand contracting practices so that they do not presentinsurmountable barriers for new entrants. Congressshould continue to fund programs that encourage andsupport new entrants while also passing legislationthat promotes innovation and acquisition reform.

The DoD and industry should incorporate allies andpartners at the design stage of capability developmentto boost exportability and interoperability while alsoseeking coproduction opportunities to expand DIBcapacity. Congress should consider reforming or creatingexemptions to long-standing regulations to enablegreater industrial cooperation. The DoD should improveinformation sharing to make it easier to work with alliesand partners, while the Department of State shouldreform the Foreign Military Sales process to enablefaster deliveries to allies and partners. In turn, allies andpartners will need to be more transparent about theirinventories and projected needs to improve interoperabilityand their security contributions.

Russia’s invasion of Ukraine laid bare the challengesthe U.S. defense industrial base (DIB) faces. TheCOVID-19 pandemic had illustrated the brittlenessof international supply chains, but the lessons learnedfrom that experience failed to translate into action inthe defense sector. The conflict in Ukraine served as astark wake-up call that underscored the limitations ofthe American DIB. Subsequent insecurity in the Indo-Pacific and the Middle East reinforced DIB constraintsas rising requests from allies and partners for munitions,platforms, and air defense systems stressed already thinsupply chains and further depleted dwindling U.S. stockpiles.The DIB is struggling to simultaneously meet thecurrent needs of the U.S. military while also supplyingits allies and partners across the globe—let alone meetthe future demands of a great power conflict against anadvanced competitor like China.

America is no longer the arsenal of democracy itonce was. The DIB of today is not the DIB that helpedthe United States and its allies win World War II andprevail in the Cold War. In the more benign post–ColdWar environment, the Pentagon bought significantlyfewer weapons, which forced the DIB to contract andconsolidate. At the same time that the defense marketplaceshrank and became less competitive, the Pentagonprioritized budgetary efficiency and waited to placeweapons orders when needed instead of stockpilingweapons or maintaining excess production capacityas a hedge. Today, despite the renewed importance ofindustrial policy to U.S. economic and national securityand the Trump administration’s desire to restoreAmerican manufacturing prowess, the DIB is beset with chronic challenges that are not improving quicklyenough to ensure U.S. and global security. The DIBlacks the capacity to produce a diverse array of defensecapabilities at relevant scale, and it does not possess theresponsiveness and flexibility to dynamically and swiftlysurge production in times of crisis. The DIB also lacksthe resilience required to withstand global shocks andthe strain of modern conflict. Without significant industrialreform, the United States is at risk of being unable todeter China and Russia from aggression and, if needed,win a future great power conflict.

U.S. officials have claimed that “production is deterrence”—that the U.S. ability to manufacture the righttypes and numbers of defense capabilities, arm alliesand partners, replenish depleted weapons stores, anddemonstrate industrial preparedness for future conflictswill deter great power adversaries from aggression.1The DIB’s deterrent value is predicated on the UnitedStates possessing the requisite capabilities, the collectivecommitment andresolve to use them, andthe resilience to reconstitutecapabilities onceexhausted. In this lineof thinking, a productiveand resilient U.S. DIB willraise the stakes for China,Russia, and their growinglist of collaborators toachieve their objectives and thus alter their calculations.

The DIB is struggling to simultaneously meet the current needs of the U.S. military while also supplying its allies and partners across the globe—let alone meet the future demands of a great power conflict against an advanced competitor like China.

The DIB is therefore critical to deterrence and acentral aim laid out by President Donald Trump inhis inaugural address: for U.S. military power to bemeasured by “. . . the wars we [the United States] neverget into.”2 However, the DIB’s deterrent value is currentlyin question. The DIB cannot currently produceenough weapons and equipment to mount a successfuldeterrence by denial strategy against China. It also lacksthe capacity to sufficiently equip allies and partners toenhance their abilities to deter and stave off aggression.Equally, it is not manufacturing the right types of innovativedefense technologies and emerging capabilities thatwill increasingly be needed to impose costs on China,Russia, and the burgeoning “axis of upheaval.”3 The DIBlacks resilience to changes in the global environment,and its inadequacies raise questions about America’sability to withstand the demands of future great powerconflict. The U.S. DIB is not productive at the neededlevels, responsive to changes in threat and technology,flexible enough to alter course, or resilient enoughto weather disruption. The DIB must be revitalized to ensure U.S. military capabilities match the threatsfacing the nation today and tomorrow, and to encouragedefense innovation that enables the military to rapidlyacquire and field the emerging technologies that willstrengthen deterrence.4

There is a missing link between defense strategy andthe defense industrial base. For too long, defense planningand industrial planning efforts have occurred in silos.Procurement and production decisions have run parallelto policy discussions and often have contradicted strategicplanning assumptions. Until recently, the development ofwarfighting strategies and operational concepts that undergirdwhich capabilities are needed and how many may berequired have not considered DIB production capacity.The schism among planning, procurement, and productionhas amplified the shrinking and inconsistent demandsignals sent from the government to industry. The consequencehas been a DIB that is unprepared and unable toproduce enough of the capabilities that form the backboneof future U.S. warfightingconcepts, are essential toachieving U.S. strategicobjectives, and enablethe United States to deterChina.5 This disconnecthas widened the chasmbetween governmentdemand and how theDIB is organized andpostured. The distance between the government—whichdrives planning and procurement—and industry—which isresponsible for production—has undermined preparednessfor great power conflict.

Amid the growing global challenges posed by China,Russia, and other competitors, America cannot be complacent.A paradigm shift is needed to strengthen the DIB’scontributions to deterrence. Better linking U.S. planningfor future conflict with the DIB provides a clearer understandingof the potential requirements of great powerconflict as well as how the DIB should reform and adapt tosupport such a conflict. This means taking concrete stepsto improve the posture and capabilities of the current DIB.Greater DIB capacity, responsiveness, flexibility, and resilienceare needed for the United States to usher in a newarsenal of democracy for the modern age.

This report links U.S. defense strategy to industrialplanning to identify DIB reforms that improve preparednessfor future great power conflict. While the reportdefines the DIB broadly, it primarily focuses on the keysuppliers of mission-critical platforms and subsystems—the publicly traded and privately held companies and their subtier suppliers—as the principal players in the DIB.The commercial producers of dual-use technologies,components, and materials are discussed but are not thepredominant focus. The report does not include the governmentservices industry in its discussion of the DIB.

The report first categorizes and links longstandingDIB challenges to explain why the industrialbase exists as it does today and why it does not supportU.S. defense objectives. The report then makes the casefor change by identifying potential trends and dynamicsof a future great power conflict and assesses their implicationsfor the DIB. This assessment reveals that the U.S.DIB is unable to meet the potential demands of futureconflict and identifies four important characteristicsthat should be built into the DIB to better prepare it forgreat power conflict: capacity, responsiveness, flexibility,and resilience. The rationale for each characteristic isdiscussed against the backdrop of the potential demandsand dynamics of future challenges. Next, to illustratehow the existing DIB could be reformed to reinforcethese key characteristics, the report details two casestudies demonstrating how changes in ammunition productionand shipbuilding could strengthen the DIB. Thereport ends with actionable policy recommendations forindustry and government for how to reform the DIB tobetter prepare for future great power conflict.

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Senior Fellow and Deputy Director, Defense Program

Becca Wasser is a senior fellow and deputy director of the Defense Program. An expert in defense strategy, scenario planning, and wargaming, Wasser’s research assesses the imp...

Research Assistant, Defense Program

Philip Sheers is a research assistant for the Defense Program at the Center for a New American Security (CNAS), where he focuses on escalation management, nuclear deterrence, ...

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