Mackenzie Eaglen, William C. Greenwalt
Taking advantage of new authorities provided by Congress, the Army will soon sign multiyear procurement contracts for munitions and launchers, energizing sluggish production lines and in some cases reopening them. The Army’s playbook should be copied by the Navy and Air Force to quickly beef up their stocks of munitions sent to Ukraine and bolster America’s flagging inventories of things that blow up.
Commenting on the multiyear contracts, Army acquisition chief Doug Bush noted these vehicles are “another way to get at accelerated production because with the guaranteed funding stream, industry can do more on their side working with their suppliers to buy parts in advance.”
He’s right. These contracts send a steady demand signal to companies, incentivizing them to ramp up capacity, expand workforces and invest their own funds in research and development. As a result, the taxpayer wins because it also drives down costs. The Congressional Research Service has noted those savings can come as low as 5% to as high as over 15% compared to the Pentagon’s normal annual purchasing approach.
Inking multiyear procurement contracts is a good first step towards reinvigorating the defense industrial base, especially when it comes to munitions. Structured for peacetime production rates after three decades on autopilot and up-and-down budgets and consisting of a shrinking number of players, the industrial base has been allowed to become more brittle. That’s left the military in a precarious position should war break out.
Take, for example, Excalibur. The United States has been sending these GPS-guided artillery shells, which can hit targets within two meters of inputted coordinates, at a rate of about 1,000 per month to aid the Ukrainians in their grinding artillery war. As Mark Cancian of the Center for Strategic and International Studies has documented, Ukraine’s monthly expenditure rate is also the shell’s current annual production rate. It would therefore take four to seven years to replace the inventory of Excaliburs sent to Ukraine.
Congress saw the need for more Excalibur shells within the US inventory, and allowed for multiyear procurement authorities to purchase an additional 12,050 of them. And, thankfully, the Army has recognized the need too, with its recent award of a contract modification for 1,000 of them as an example.
Unfortunately, instances like this, where a general lack of urgency about threats and rosy assumptions about war plans lead to failures in buying enough weapons and munitions, are all too common inside the Defense Department. Instead of investing slightly above need to build in margin and keep manufacturing lines hot, the Pentagon has traditionally valued compliance to process. This is one reason industry is in stasis and why money alone cannot ramp up production rates fast enough.
The Army’s multiyear procurement contracts are only a start to getting these workforces trained, tooling on hand, vendors second sourced and facility capacity restored. The Navy and the Air Force should also take advantage of the authorities provided to them in the recent National Defense Authorization Act and acquire more Harpoons, Naval Strike Missiles, Joint Air-to-Surface Standoff Missiles, and other sea and air-launched munitions using multiyear contracts.
Congressional appropriators should rethink and readjust the threshold for approval of certain multiyear contracts. Per legislation for this fiscal year, any multiyear contracts greater than $500 million require appropriators’ approval. This is too low, and constrains the type of large buys industry depends on to build up and hold excess capacity. For next year, appropriators should consider doubling that threshold to $1 billion, giving the services more breathing room.
On a more fundamental level, the defense industrial base must shift from one built for peacetime to one built for the pace of war. That means a shift in false expectations by leaders that the defense industrial base can just be turned on and off as needed.
Washington needs to care more about keeping needed production lines open, whether that be foreign military sales, such as in the case of the F-16, or simply “buying to buy” and add buffer to capability. These lines are critical national assets and are our country’s insurance policy. Should a war break out, production would have to ramp up quickly, something a closed production line could never do. In the words of the Pentagon’s acquisition head, Bill LaPlante, we should “be comfortable as taxpayers funding production lines to produce things that the US may never use.”
The Army is leading this needed restoration. The service’s expected use of multiyear contracts is the right move for its own capabilities, the defense industrial base, and our support for Ukraine. The Navy and the Air Force should follow suit.
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