WASHINGTON — As Pentagon officials gauge the defense industry’s ability to ramp up arms production in response to the ongoing Russia-Ukraine conflict, firms are still grappling with pandemic-related supply chain and workforce woes.

Top defense executives are likely to face questions starting this week during quarterly earnings calls about how they’ll be able to overcome those issues. Experts say the answers are unclear.

According to Bill Greenwalt, who served as deputy undersecretary of defense for industrial policy during the George W. Bush administration, it has historically taken the U.S. defense industrial base 18 months to 3 years to get ready for conflicts.

“Our budget, appropriations, requirements, and acquisition systems are stuck in a peacetime mode where time doesn’t matter, and it will be difficult to pivot out of those processes quickly,” Greenwalt, now with the American Enterprise Institute, said in an email.

“The U.S. will face start-up production line issues, labor issues, supply chain issues, parts and machine tool obsolescence issues, time constraints certifying new suppliers and technical approaches, plus time waiting for budgets and contracts to be issued,” he added.

Last week, Deputy Secretary of Defense Kathleen Hicks convened a meeting with representatives of eight major defense firms to discuss industry proposals to accelerate production of existing systems. The meeting was focused on satisfying the needs of the U.S., Ukraine and other allies, according to an official readout.

Andrew Hunter, who was performing the duties of undersecretary of defense for acquisition and sustainment, led a roundtable during the meeting to discuss ways of boosting production capacity for “weapons and equipment that can be exported rapidly, deployed with minimal training, and prove effective in the battlefield,” the readout said.

Boeing, L3 Harris Technologies, Raytheon Technologies, BAE Systems, Lockheed Martin, HII, General Dynamics and Northrop Grumman all attended, according to DoD.

The gathering marked the second time in three months DoD leaders have convened a group of industry executives at the Pentagon. Hicks, with Defense Secretary Lloyd Austin, in early February met with hypersonics industry executives, who urged investment in testing infrastructure.

Since Russia’s invasion of Ukraine began Feb. 24, the U.S. has provided $2.6 billion in security assistance to Ukrainian forces, most from U.S. military stockpiles. An $800 million package announced last week was the seventh such drawdown package.

DoD says that as of April 14, it’s provided more than 1,400 Stinger anti-aircraft systems; 5,500 Javelin anti-armor systems; 700 Switchblade tactical unmanned aerial systems; 7,000 small arms; 50 million rounds of ammunition; and 18 155mm Howitzers with 40,000 155mm artillery rounds; 16 Mi-17 helicopters; hundreds of armored Humvees and 200 M113 Armored Personnel Carriers.

Last month, Congress finalized the fiscal year 2022 $1.5 trillion spending bill, which provides $13.6 billion in new aid for the Ukraine crisis. The money was in large part to restore military stocks of equipment already transferred to Ukrainian military units through the president’s drawdown authority.

Pentagon Press Secretary John Kirby assured reporters last week none of the military’s stocks for the systems are so low that the military’s readiness would be imminently affected. He described the discussion with CEOs as a precaution.

“As these packages go on, and as the need continues inside Ukraine, we want to … be ahead of the bow wave on that and not get into a point where it becomes a readiness issue,” he said.

One analysis by Mark Cancian, a Center for Strategic and International Studies senior adviser, estimated that, based on DoD’s own reporting, the U.S. military has probably given about one-third of its Javelin anti-tank missiles to Ukraine and has between 20,000 to 25,000 left.

To ramp up from the U.S. military’s current buy of 1,000 per year to maximum capacity of about 6,480 Javelins a year would take a year, Cancian found. Replenishing U.S. stocks would require 32 months, unless the president invokes the Defense Production Act to prioritize deliveries of components to the manufacturer, a joint Lockheed-Raytheon venture.

“To get from 1,000 to 6,000 more quickly, you need some help,” Cancian said.

Cancian noted that not only is DoD concerned with its own supplies and equipping Ukraine but backfilling allies who are sending Ukraine tanks and missile defense systems, placing further demands on the U.S. defense industrial base.

Long-term planning

Meanwhile, as industry weighs investments in its production lines, the Pentagon has yet to release detailed and long-term spending plans for FY23. Industry should be wary of the government’s ability to finalize those plans in a timely way, according to Greenwalt.

“The department sometimes has a history of leaving industry holding the bag when the money doesn’t show up from the appropriators,” he said. “When it comes to DoD’s relationship with industry, no good deed ever goes unpunished.”

In a note to investors Monday, Capital Alpha Partners Managing Director Byron Callan cautioned against factoring demand from the Ukraine fight into predictions for the defense outlook.

“It’s going to take months to see how the changed security environment in Europe will translate to changes in defense demand in 2023-25,” Callan said. “For analysts, it’s best, for now, to build scenarios as there could still be downside risk (Russian defeat, Putin falls).”

Even if it makes financial sense for industry to ramp up production, there’s a question of how. The National Defense Industrial Association’s “Vital Signs” survey of defense firms recently gave a failing grade to the defense industrial base and its ability to surge production capacity, as the ongoing COVID-19 pandemic continues to roil the sector.

The diversity, productivity and compensation of the industry’s workforce was the No. 1 concern in the survey, with the availability of materials right behind it. Asked what issues could have been raised in the recent meeting between industry and Pentagon leaders, NDIA representatives said those concerns, among others, have not gone away.

“We asked, ‘Where is your supply chain most vulnerable?’ and the No. 1 answer was ‘gap in U.S.-based human capital,’ and ‘constrained supply chain’ was the No. 2 response,” said Nick Jones, NDIA’s director of strategy.

Among the top 100 publicly traded defense contractors, the cash conversion cycle — how long it took for firms to buy parts and turn them into a system and sell it — rose from 56 days in 2019 to 128 days in 2020.

“If it takes you 128 days from start to finish, that really hampers your ability to surge,” said NDIA Regulatory Associate Robbie Van Steenburg.

Callan, in his note, also said workforce issues could hinder the defense sector’s ability to meet higher demand. Whether defense firms can find the workers needed to build more weapons, if required, remains an open question.

“It’s been tough to hire people, particularly in engineering and skilled trades, and extremely challenging to hire people with clearances,” Callan said. “These sorts of issues are not new for the sector, but they raise a fundamental issue — can capital investments and workforce expansion earn acceptable returns, or is there a view that surging demand in 2022-23 could ebb away in 2024-26?”

Joe Gould was the senior Pentagon reporter for Defense News, covering the intersection of national security policy, politics and the defense industry. He had previously served as Congress reporter.

More In Industry