WASHINGTON — Defense companies are taking matters into their own hands — in partnership with the Pentagon — to recover a withering supply chain for the munitions market.
Released in the spring of this year, the annual industrial capabilities report, put out by the Pentagon’s Office of Manufacturing and Industrial Base Policy, concluded that the industrial base of the munitions sector is particularly strained — something the report blamed on the start-and-stop nature of related procurement over the last 20 years, as well as the lack of new designs being internally developed.
For their part, primes are investing their own dollars to meet demand, particularly as the Pentagon plans to invest more than $20 billion in munitions in its next budget.
“We went through a period over the last decade, where U.S. production requirements of munitions were at a fairly low rate compared to historical,” said Frank St. John, executive vice president of Lockheed Martin’s Missiles and Fire Control business. “Our response was to work hard to bring international partners into the programs and fill that with foreign military sales requirements. What we’ve seen over the last 18-25 months is a recognition by the department that they need to rebuild the stock on munitions. We’ve seen a steady increase across the board in every one of our programs — rate increases from 20 percent to 80 percent.”
But as primes expand factory capacity to achieve increased rates, suppliers are often limited in their ability to scale. That leaves Lockheed and Raytheon, the companies that together account for about 97 percent of the Defense Department’s munitions and missile procurement funding, to identify critical areas that might have a single source and make investments to develop alternatives, avoiding any single points of failure.
The Department of Defense is baking funds for such investments into the procurements, and structuring more munitions buys as multiyear contracts.
“We’re looking at a couple in some of our largest missile programs,” said Taylor W. Lawrence, president of Raytheon’s Missile Systems business. “That gives us the ability to predict the future. That also allows us to flow stability down into the supply base and makes it healthier over time. The most disruptive thing to us in industry [is] uncertainty, and variability in quantities they’re buying. The more we can predict, the better the health of the supply base will be.”
But even if a pool of first-tier suppliers can be stood up by joint efforts of primes and the Pentagon, dwindling materials used in the systems pose a more daunting challenge. As one example noted in the report, the department is facing rising costs for ammonium perchlorate, used in almost all DoD missile programs, because the sole is only operating at 10-15 percent of capacity due to limited demand. Similarly, there is no domestic supplier for Dechlorane Plus 25, a component in the insulation of weapons; the sole source is Occidental Chemical in Belgium.
Mackenzie Eaglen, a defense expert with the American Enterprise Institute, said in a May interview with Defense News that policymakers will likely want to start considering special protections and/or subsidies when needed. That said, “I’m not sure the bell can be un-rung in the case of Chinese suppliers,” she added.
In coordination with the DoD, primes are more often buying additional stock of the at-risk components to buy time to work alternative solutions, St. John said. They also identify alternative suppliers when they can, domestically or in an ally nation where a steady source of supply is fair to assume.
Also, to reinvigorate the supply of raw materials, efforts are underway to develop and qualify brand-new plotters domestically.
“So far, we’ve been able to address the needs,” St. John said. “But it is different than it was years ago, when DoD and military applications were on the leading edge. Now we’re buying along with the Apples and Samsungs of the world. We’re not driving the market the way we used to — as opposed to being the big dog.”
Aaron Mehta contributed to this report.
Jill Aitoro was editor of Defense News. She was also executive editor of Sightline Media's Business-to-Government group, including Defense News, C4ISRNET, Federal Times and Fifth Domain. She brought over 15 years’ experience in editing and reporting on defense and federal programs, policy, procurement, and technology.