4073. LINK TURN. The binding constraint is capacity, not orders---the base can’t build what’s already sold.
Oliver Wyman 26 — Steve Beckey, JD Kearney, Nathan Miller and Timothy Wickham. July. Authors of a May 2026 survey of over 160 U.S. defense supply-chain companies, including original equipment manufacturers and Tier 1 and sub-tier suppliers. Oliver Wyman, “The Defense Ramp-up Reality Check,” https://www.oliverwyman.com/our-expertise/insights/2026/jul/us-defense-industrial-base-production-ramp.html Clopus
The United States defense market is in a historic period of production ramp-up, but the industrial base is struggling to meet the demand.
To map the current state of manufacturing capacity, we conducted a comprehensive survey of the US defense supply chain. In May 2026, we gathered detailed responses from over 160 companies, including original equipment manufacturers, Tier 1 suppliers, and sub-tier suppliers.
As markets signal rising demand — and ongoing conflicts are likely to increase the backlog to almost $900 billion — companies across the industry told us they are navigating complex shifts in operational resilience, financial stability, and technology. Each segment of the value chain faces distinct pressures, but the overall picture is an industrial base is unprepared for the pending production ramp.
4084. NO IMPACT. Weapons money is the worst jobs money in the federal budget.
Peltier 25 — Heidi Peltier. September 2. Senior Researcher at the Thomas J. Watson Jr. School of International and Public Affairs at Brown University and Director of Programs for the Costs of War project. Costs of War, “The Employment Impacts of Cuts to Federal Spending: Not All Cuts Are Created Equal,” https://costsofwar.watson.brown.edu/paper/employment-impacts-cuts-federal-spending-not-all-cuts-are-created-equal Clopus
The majority of the federal workforce involves military-related sectors, including the military, homeland security, and more. But military spending is inefficient for employment: spending on education and healthcare would create more jobs while reducing the federal budget.
This report, an update to a previous paper from 2023, reveals that military spending (including both federal defense spending and various private military industries) produces an average of five jobs per $1 million in spending, including both direct jobs and jobs in the supply chain. By contrast, 13 jobs are created for every $1 million in education spending – nearly three times as much employment. Healthcare spending creates 84% more jobs than military spending, while infrastructure and clean energy create from 24% to 64% more.
In 2025 the federal government is making large cuts in personnel and spending in various programs that Americans value – including education, healthcare, environmental programs, public parks and lands, and many others. At the same time, the Trump administration is increasing the size of the federal budget by devoting more spending and resources to the military and homeland security, further exacerbating a disproportional federal budget and workforce.
Federal spending on the Department of Defense accounts for half of all discretionary spending (49%) and more than half (60%) of federal employment as of the end of fiscal year 2024. Adding funding for the Departments of Homeland Security and Veterans Affairs, the military sectors make up almost two-thirds (61%) of the federal discretionary budget and 78% of the federal workforce (including both civilians and active-duty military). This is a seven percent increase in the military-related workforce since the previous 2023 report based on fiscal year 2022 data.
Of the 3,669,000 federal workers in 2024, 2,846,077 were employed in either DHS, VA, or DoD.
It is precisely because military spending is exorbitant that so many jobs have been created in the military-related sectors of the federal government. However, a shift in funding from military to non-military programs would result in an increase in employment (since other programs are better job creators than the military) without an increase in the budget.
4091. The base was engineered for peacetime efficiency---warm lines aren’t the problem, surge is.
Cancian and Park 26 — Mark F. Cancian and Chris H. Park. July 31. Senior Adviser in the Defense and Security Department at CSIS. Research Associate with the Arleigh A. Burke Chair in Strategy at CSIS. Center for Strategic and International Studies, “Six Reasons Why the United States Is Low on Munitions,” https://www.csis.org/analysis/six-reasons-why-united-states-low-munitions Clopus
3. The industrial base was designed for efficient peacetime production, not surge.
When the Cold War ended, the DOD realized that the smaller budgets of the post–Cold War world would not support the large existing defense industrial base. In 1993, then-Deputy Secretary of Defense William Perry gathered defense industry executives for what became known as “ the Last Supper .” He told them to merge or diversify. They did. The result was a much smaller defense industrial base. The number of aerospace and defense prime contractors, for example, decreased from 51 to 5; the number of subprimes decreased commensurately. The whole structure got smaller.
The defense industry not only got smaller but, driven by the change in strategy, restructured itself for efficient production at peacetime rates. Surge capability was regarded as unnecessary and wasteful. As a result, very little spare capacity was available when the DOD decided to surge some production in 2022.
4. Munitions compete poorly in the Pentagon’s budget process.
Regardless of the defense budget’s size, the military services must always make trade-offs. In procurement, they face a trade-off between buying munitions or platforms such as aircraft, armored vehicles, and ships. Platforms have the advantage of operating for 30 years, being highly visible, and therefore contributing to deterrence. Munitions go into a bunker after production and only come out if there is a war or their service life has expired. Thus, munitions have often served as bill payers for higher-priority needs despite recognition of their importance.
4102. Suppliers can’t convert a demand signal into output---labor and sub-tier depth are the chokepoints.
Oliver Wyman 26 — Steve Beckey, JD Kearney, Nathan Miller and Timothy Wickham. July. Authors of a May 2026 survey of over 160 U.S. defense supply-chain companies, including original equipment manufacturers and Tier 1 and sub-tier suppliers. Oliver Wyman, “The Defense Ramp-up Reality Check,” https://www.oliverwyman.com/our-expertise/insights/2026/jul/us-defense-industrial-base-production-ramp.html Clopus
The survey points to a clear gap between demand signals and production readiness, with six challenges standing out across the defense supply chain:
The ramp is real, but the supply base lags behind. Suppliers see the demand signal, but many do not believe they can translate it into executable capacity quickly enough.
Uncertainty is stalling investment. Demand uncertainty, both in timing and in scale, is keeping suppliers from making the necessary investments.
The market is burdened by a growing “trust tax.” Suppliers are holding excess capacity in reserve and carrying buffers as insurance against sub-tier delivery risk.
Workforce issues could cripple the ramp-up. The industry continues to struggle with labor challenges, including finding, training, and retaining the expertise required to scale production.
Tier 2+ suppliers are often the hollow middle of the ramp. Sub-tier suppliers are a structurally exposed segment of the industrial base, with the least financial, operational, and digital room to absorb the surge.
AI adoption has begun , but it is not yet a ramp solution. Early adopters are beginning to see marginal benefits, but the technology remains too unevenly deployed to offset the broader challenges.
4113. Freeing a line is the only lever that works---new orders don’t buy speed.
Novelly and Williams 8-21 — Thomas Novelly and Lauren C. Williams. August 21. Reporters covering the defense industry and the Pentagon for Defense One. Defense One, “There’s no shortcut to replenish US munitions stockpiles,” https://www.defenseone.com/business/2026/08/theres-no-shortcut-replenish-us-munitions-stockpiles/415558/ Clopus
Right now, the Pentagon is blowing through its prized Patriot and Terminal High-Altitude Area Defense missiles, and they won’t get replaced anytime soon, defense analysts say —even with novel framework deals .
In the last year, top officials have been pushing those deals with major defense primes and are continuing the administration’s rallying cry for the firms to build and innovate faster. Some of those are starting to bear fruit.
This week, RTX netted a seven-year, $22.9 billion Tomahawk missile contract with the U.S. Navy under a new deal, showing that the military is making big bets on legacy systems as it pursues newer options.
But those legacy munitions still take time to manufacture. In a recent report , the American Enterprise Institute think tank found that it would take 27 years for defense contractors to produce THAADs at the current maximum annual rate of 96 interceptors a year to reach quantities the Pentagon wants.
There “will be a window of vulnerability for several years until inventories return to their previous levels, and another several years before they get to the levels that war planners desire,” according to a May report from the Center for Strategic and International Studies.
“These newer, lower-cost munitions absolutely should be part of the way we fix this. But we shouldn't be kidding ourselves that they're going to be ready quickly en masse, are operational, and our forces are trained and understand how to use them,” said Todd Harrison , AEI’s defense budget expert. “It will take years, some sooner than others. And I think it remains to be seen if they're going to be available in large quantities sooner than the reorders of the more exquisite existing weapons.”
Framework deals aren’t contracts
The Pentagon has already inked framework agreements for low-cost and traditional munitions. Overall, experts say they are a step in the right direction.
“It's not a contract, but it helps give the companies a demand signal they can take to their boards and their shareholders, and…it reduces their risks, so they can make increased capital expenditures, or capex, investments,” said Jerry McGinn , a CSIS senior fellow and the director of the Center for the Industrial Base.
McGinn teased an upcoming CSIS analysis that found publicly-traded companies with framework agreements increased their capex investment by 31 percent from the second quarter of 2025 to the same quarter this year.
“They're clearly investing more and it's hard not to tie it to those framework agreements. But the challenge is that the framework agreement is an agreement…It's a best faith effort. It's not a contract,” he said.
4122. Washington is pouring money and policy into the base right now---that’s the uniqueness.
McGinn and Dilts 26 — Jerry McGinn and A.J. Dilts. July 6. Director of the Center for the Industrial Base and senior fellow with the Defense and Security Department at CSIS. Research associate at CSIS. Center for Strategic and International Studies, “Is the Industrial Base on a Wartime Footing? A Progress Report,” https://www.csis.org/analysis/industrial-base-wartime-footing-progress-report Clopus
The Pentagon first outlined the goal of putting the United States industrial base on a “ wartime footing ”—the condition of being prepared to deter and, if necessary, prevail in a protracted conflict—in November 2025. What steps have government and industry taken since then to make this ambition a reality?
By initiating and incentivizing large-scale public and private investments, deploying novel industrial policy tools, and undertaking significant defense acquisition reforms, the Department of Defense (DOD) has made meaningful progress toward fostering an industrial base for wartime readiness. Roughly 10,000 new firms have entered the market in the past two years and nontraditional companies received over $120 billion in contract obligations in FY 2025, adding competition and innovation to the sector. Munitions contract obligations have risen 330 percent since FY 2010. Spurred by this increased demand and depleted inventories, the Pentagon is signing multiyear agreements with munitions producers and suppliers on a historic scale.
In addition to developing magazine depth, the DOD is prioritizing magazine breadth , placing an increased emphasis on equipping the Joint Force with a “ high-low mix ” of both exquisite and affordable missiles and interceptors. Based on the Pentagon’s FY 2027 budget request , the DOD plans to grow its demand for low-cost munitions from 49 percent of total munitions requested in FY 2027 to 70 percent in FY 2031. Stockpiles require resilient supplies of subcomponents, and new firms and forms of government-industry collaboration are reshaping the solid rocket motor (SRM) sub-sector. At the bedrock of defense supply chains, unprecedented commitments of public and private capital are focused on establishing a secure mine-to-magnet rare earth supply chain outside Chinese control. According to author analysis of announcements from several federal agencies, the scale of U.S. government investment in rare earth projects in the past sixteen months has increased by 321 percent from the previous four years. Finally, industrial collaboration between the United States and its allies and partners greatly facilitates overall industrial capacity, and a 347 percent growth in U.S. foreign military sales (FMS) from FY 2015 to FY 2025 points to potential closer allied industrial integration.
Yet industrial plans are not the same as results, and isolated bursts of investment are not the same as institutionalized industrial power. The time scales needed to deliver several critical munitions , for example, depleted after the war in Iran, continue to stretch more than three years . Though investment announcements have risen following China’s export controls in April and October 2025, U.S. and allied efforts to rebuild a secure rare earth ecosystem are in their early stages. While new entrants to the industrial base promise advanced technologies at low cost and high volume, moving defense innovations from concept to contract takes a sustained government demand signal and continued cooperation with private firms.
In short, getting on a wartime footing takes time. It must be built and maintained through strong and consistent budgetary demand signals, enduring coordination within supplier networks, effective coordination mechanisms and incentive structures between government and industry, and strong U.S. collaboration with allies and partners. The following analysis assesses where progress is being made and identifies areas for additional focus.
4131. Their own institute says the volume is small---the story is geopolitical, not industrial.
ADF 26 — Africa Defense Forum. April 14. Professional military magazine published by U.S. Africa Command, reporting Stockholm International Peace Research Institute researcher Katarina Djokic. ADF, “Arms Sales Drop Across Most of Africa,” https://adf-magazine.com/2026/04/arms-sales-drop-across-most-of-africa/ Clopus
“The growth in arms imports to West Africa has been striking,” said Katarina Djokic, a SIPRI researcher. “While the volume of imports remains relatively small, it has important geopolitical implications.”
4142. Their own notification: no readiness effect, no balance shift, no new personnel.
DSCA 25 — Defense Security Cooperation Agency. August 13. Department of Defense agency that administers Foreign Military Sales and delivers the statutory certification notifying Congress of a proposed sale. U.S. Department of Defense, “Nigeria – Munitions, Precision Bombs, and Precision Rockets,” Transmittal No. 21-47, https://media.defense.gov/2025/Aug/13/2003780073/-1/-1/1/PRESS%20RELEASE%20-%20NIGERIA%2021-47%20CN.PDF Clopus
This proposed sale will support the foreign policy goals and national security objectives of the United States by improving the security of a strategic partner in Sub-Saharan Africa.
The proposed sale will improve Nigeria’s capability to meet current and future threats through operations against terrorist organizations and to counter illicit trafficking in Nigeria and the Gulf of Guinea. Nigeria will have no difficulty absorbing these munitions into its armed forces.
The proposed sale of this equipment will not alter the basic military balance in the region.
The principal contractors will be RTX Missiles and Defense, Tucson, AZ; Lockheed Martin Corporation, Archibald, PA; and BAE Systems, Hudson, NH. At this time, the U.S. Government is not aware of any offset agreement proposed in connection with this potential sale. Any offset agreement will be defined in negotiations between the purchaser and the contractor.
Implementation of this proposed sale will not require the assignment of any additional U.S. Government or contractor representatives to Nigeria.
There will be no adverse impact on U.S. defense readiness as a result of this proposed sale.
4152. The militarized share of the federal workforce is the reason employment is low, not high.
Peltier 25 — Heidi Peltier. September 2. Senior Researcher at the Thomas J. Watson Jr. School of International and Public Affairs at Brown University and Director of Programs for the Costs of War project. Costs of War, “The Employment Impacts of Cuts to Federal Spending: Not All Cuts Are Created Equal,” https://costsofwar.watson.brown.edu/paper/employment-impacts-cuts-federal-spending-not-all-cuts-are-created-equal Clopus
Federal spending on the Department of Defense accounts for half of all discretionary spending (49%) and more than half (60%) of federal employment as of the end of fiscal year 2024. Adding funding for the Departments of Homeland Security and Veterans Affairs, the military sectors make up almost two-thirds (61%) of the federal discretionary budget and 78% of the federal workforce (including both civilians and active-duty military). This is a seven percent increase in the military-related workforce since the previous 2023 report based on fiscal year 2022 data.
Of the 3,669,000 federal workers in 2024, 2,846,077 were employed in either DHS, VA, or DoD.
It is precisely because military spending is exorbitant that so many jobs have been created in the military-related sectors of the federal government. However, a shift in funding from military to non-military programs would result in an increase in employment (since other programs are better job creators than the military) without an increase in the budget.
4161. Munitions are the bill payer---the services trade them for platforms every cycle.
Cancian and Park 26 — Mark F. Cancian and Chris H. Park. July 31. Senior Adviser in the Defense and Security Department at CSIS. Research Associate with the Arleigh A. Burke Chair in Strategy at CSIS. Center for Strategic and International Studies, “Six Reasons Why the United States Is Low on Munitions,” https://www.csis.org/analysis/six-reasons-why-united-states-low-munitions Clopus
4. Munitions compete poorly in the Pentagon’s budget process.
Regardless of the defense budget’s size, the military services must always make trade-offs. In procurement, they face a trade-off between buying munitions or platforms such as aircraft, armored vehicles, and ships. Platforms have the advantage of operating for 30 years, being highly visible, and therefore contributing to deterrence. Munitions go into a bunker after production and only come out if there is a war or their service life has expired. Thus, munitions have often served as bill payers for higher-priority needs despite recognition of their importance.
5. The use of munitions in recent wars has reduced inventories.
Wars fought by the United States in the past half decade have required high-end munitions at levels not needed during the counterterrorism campaigns of the early twenty-first century.
Both the Biden and second Trump administrations expended munitions in the Middle East to deal with the regional war precipitated by Hamas’s October 7 attack on Israel.
4172. There is no shortcut---even the cheap replacements need years of test and evaluation.
Novelly and Williams 8-21 — Thomas Novelly and Lauren C. Williams. August 21. Reporters covering the defense industry and the Pentagon for Defense One. Defense One, “There’s no shortcut to replenish US munitions stockpiles,” https://www.defenseone.com/business/2026/08/theres-no-shortcut-replenish-us-munitions-stockpiles/415558/ Clopus
HUNTSVILLE, Ala. — As the U.S. military’s critical munitions are quickly used in the Iran war and slowly produced at home, companies are eagerly pitching new low-cost solutions, and the Pentagon is keen to make big deals. But defense experts say those new, cheaper missiles—and the push to accelerate production of existing weapons—won't soon overcome problems exacerbated by the Iran war, even though they will eventually provide the military much-needed options.
At the Space and Missile Defense Symposium last week, Boeing unveiled a low-cost seeker missile, with crucial hit-to-kill guidance technology used on the PAC-3 missile, made of commercial, off-the-shelf components. At the same conference, Northrop Grumman released its “cost-effective” 50-millimeter gun-based drone defense system to “address a critical short-range air defense gap.”
And last month at the Farnborough International Air Show, Lockheed Martin announced a more affordable, proximity-detonation version of its Patriot missile. But those solutions will likely only boost the Pentagon’s stockpiles if the Iran war drags on and if officials quickly award contracts.
“The push for low-cost munitions is unlikely to have a material effect on the Iran War—at least not anytime soon,” said Becca Wasser , Bloomberg Economics’s defense lead.
And, she said, making enough new weapons, at the right cost, is only part of the problem.
“Getting to a lower cost for exquisite munitions will take time. It requires developing new weapons or adapting old ones, which means going through new testing and evaluation processes,” she said. “If the Iran war drags on for years, that’s when the drive for lower cost interceptors and munitions could have an impact,” because “wars of attrition require enormous amounts of material—and the lower price tag helps.”
4181. CAPABILITY. At this tier the market shrinks---and nobody can build the system at home either.
AT: the embargo caveat---Yousif’s exception is a comprehensive cut-off. The plan is a reduction.
Yousif 23 — Elias Yousif. Research Analyst with the Conventional Defense Program at the Stimson Center, researcher on U.S. arms transfer policy and security cooperation. Stimson Center, “‘If we don’t sell it, someone else will:’ Dependence & Influence in US Arms Transfers,” https://www.stimson.org/2023/if-we-dont-sell-it-someone-else-will-dependence-influence-in-us-arms-transfers/ Clopus
The type of capability under consideration will also impact the likely availability of alternate supplies. Small arms and light weapons, for example, are relatively simple to produce, can be easily made in large quantities, are manufactured all over the globe, and are generally comparable in capabilities. 5 Note: Suneel Kumar, “Small Arms and Light Weapon: A Global Threat to Human Security and Development,” The Indian Journal of Political Science, Vol. 69. No 4, (Oct 2008), pg. 787-788. Compare that to advanced fighter aircraft or other highly sophisticated systems, and not only does the market become much smaller, but the likelihood that such a system can be produced domestically also shrinks. 6 Note: Harrison Kass, “Only 3 Countries Have Built 5th-Generation Fighters, but Militaries are Already Working on More Advanced 6th-gen Jets,” Business Insider, September 4th, 2022, accessed November 3, 2022. https://www.businessinsider.com/what-features-and-design-will-a-6th-generation-fighter-have-2022-9#:~:text=Fifth%2Dgeneration%20fighters%20are%20so,interconnectivity%20%E2%80%94%20is%20still%20cutting%20edge. Moreover, these advanced systems are less likely to be interoperable with or functionally comparable to those of competing suppliers.
4192. CAPABILITY. Chinese kit already failed in Nigerian service---thermal and metallurgical defects, and no life-cycle support.
Asia Times 26 — Asia Times. July. Regional news and analysis publication, reporting a June 2026 study by the Takshashila Institution on Chinese arms exports. Asia Times, “China’s often flawed arms still buy lasting influence,” https://asiatimes.com/2026/07/chinas-often-flawed-arms-still-buy-lasting-influence/ Clopus
China’s weapons may face mounting questions over quality, reliability and after-sales support, but its arms trade still serves a larger strategic purpose: locking vulnerable states into long-term military, economic and political dependence.
That paradox is at the center of a June 2026 report by The Takshashila Institution, which argues that China’s rise as a major global arms exporter has outpaced its ability to guarantee battlefield performance and life-cycle support.
The report says China’s state-led military-industrial complex has supplied a rising number of tanks, drones, ships, missiles and aircraft to buyers, including Pakistan, Thailand, Saudi Arabia, Iraq, Algeria, Nigeria, Kenya and Myanmar.
It notes repeated problems in widely exported systems, including thermal and metallurgical issues in VT-4 tanks used by Thailand and Nigeria, and crashes, offloading incidents or groundings involving CH-4B drones operated by Jordan, Iraq and Algeria.
China became one of the world’s top arms exporters while reducing its own dependence on imports, with Pakistan, Serbia, Thailand and Algeria relying heavily on Chinese weapons systems by 2025.
Still, the report says operational failures, spare-parts shortages, sanctions pressure, corruption probes and renewed US and Russian competition may limit deeper defense ties beyond close partners such as Pakistan.
4203. CAPACITY. Moscow’s export machine is gone---the war eats the output and the line builds for itself.
Daly 25 — John C. K. Daly. January 15. Eurasian foreign affairs and defense policy expert for the Jamestown Foundation and non-resident fellow at the Central Asia-Caucasus Institute. Jamestown Foundation, “Russian Arms Exports Collapse by 92 Percent as Military-Industrial Complex Fails,” https://jamestown.org/russian-arms-exports-collapse-by-92-percent-as-military-industrial-complex-fails/ Clopus
Russia’s arms exports dropped by 92 percent from 2021 to 2024 due to redirected resources for Ukraine, sanctions, inflation, and funding issues.
The number of countries purchasing Russian arms has dropped dramatically. Major customers such as India have shown caution or shifted to competitors such as the People’s Republic of China.
Russia has been promoting its Su-57E stealth fighter, emphasizing combat experience in Ukraine, but faces setbacks such as poor international sales and buyer reluctance. Despite challenges, Moscow is focusing on domestic contracts.
As Russian President Vladimir Putin’s “special military operation” (SVO) against Ukraine approaches its third year, its casualties increasingly include Russian arms exports, traditionally the economy’s second largest export earner after energy. By the end of 2024, Russian arms exports decreased fourteenfold from their levels in 2021 by 92 percent to less than $1 billion ( Arbat Media , November 30, 2024). In 2021, before the full-scale invasion began, Russian arms exports generated $14.6 billion; in 2022, $8 billion; and in 2023, $3 billion. The most significant factor behind the reduction in exports is the redistribution of resources for domestic needs, as Russia’s military-industrial complex’s top priority is now equipping its own armed forces during its military conflict with Ukraine (see EDM , October 3, 2024).
In March 2023, the Stockholm International Peace Research Institute (SIPRI) reported that Russia, for the first time, dropped to third place in the ranking of the largest exporters of military equipment, behind the U.S. and France. The People’s Republic of China (PRC) and Germany are in fourth and fifth place in the world in arms exports, respectively. SIPRI reported that the Russian Federation exported 53 percent fewer weapons in 2019–2023 than in 2014–2018 ( RIA Novosti , November 3, 2024).
The market for Russian armaments have declined from thirty-one countries in 2019 to just twelve in 2024 despite Russia continuing to work with major customers such as the PRC, Myanmar, and India. High interest rates, now 21 percent, further aggravate the market and impact the future of Russian defense manufacturers. In an ironic development, many previous customers have turned to the PRC, leaving the question of whether Russia can regain its market share.