The agency, for the first time in roughly 20 years, did not provide a public briefing on its budget request at the Pentagon. A budget summary provided by the Defense Department March 11 lacked a breakdown of how much the agency is asking for research and development, procurement, operations and maintenance and military construction.

However, for the next fiscal year, the agency said its most significant investments are focused on homeland defense and protecting the strategically important island of Guam from air and missile defense threats in the Pacific.

Here’s how the proposed spending compares to budgets past:

♦ MDA is requesting $2.7 billion to advance its Next Generation Interceptor development effort as well as upgrade and replace Ground-based Midcourse Defense system components and infrastructure, improve fire control and kill vehicle software and buy long lead items for the Phased Array In-Flight Communication System Data Terminal retrofits. The agency did not lay out specifically how much of the funding would go toward NGI development or GMD system improvements.

Two teams — Lockheed Martin and Aerojet Rocketdyne as well as Northrop Grumman and Raytheon — are competing to develop NGI, which will replace the current ground-based interceptors in the GMD system, which is designed to protect the United States from intercontinental ballistic missiles from North Korea and Iran.

A year ago, the agency asked for a total of $3.2 billion for the effort, which included $2.1 billion for NGI, $903.6 million for GMD upgrades and operations and another $41.8 million in testing and $174.8 million in maintenance.

♦ MDA wants to spend $1.2 billion on the defense of Guam in FY25, more than twice what the agency asked for in FY24. Funding would go toward developing and buying Aegis systems tailored for ground-based sites on the island and Vertical Launch Systems. Some of the money would also support a complete environmental impact study and construction on a Command Center Complex, a Transportable Array Unit Complex and a launcher field complex, the document lists.

♦ The agency is asking for $1.2 billion to buy 12 SM-3 Block IIA missiles and SM-3 Block IB spares but will not buy any additional SM-3 Block 1B missiles. Software capability development will continue to upgrade the ability for Aegis ships to take on the new AN/SPY-6 radar, designed to better track more advanced threats.

♦ The Terminal High Altitude Area Defense system, an anti-ballistic missile defense system, would get a small boost in MDA’s budget in FY25 compared to a year ago. The agency is asking for $732 million to continue developing interceptor capability and weapon system performance against more advanced threats, to buy 12 THAAD interceptors and to start engineering to integrate THAAD into the Army’s Integrated Air and Missile Defense Battle Command System architecture.

The agency asked for $574 million for THAAD including buying 11 interceptors in FY24.

♦ Funding for development of the Glide Phase Interceptor dropped by $27 million to $182 million in FY25. MDA requested $209 million last year. The interceptor, which would defend against hypersonic missiles farther away from intended targets, is in a competitive preliminary design phase.

♦ MDA continues to request funding for its Hypersonic and Ballistic Tracking Space Sensor and the Space-based Kill Assessment. The agency wants $120 million to continue the HBTSS on-orbit demonstration, which is designed to track and target hypersonic threats. The HBTSS launched into space on Feb. 14.

♦ The agency wants to buy an additional AN/TPY-2 radar and sustain its other 12 radar systems to “improve discrimination capabilities.” The radars are positioned around the globe to help track ballistic missile threats. MDA is asking for $587 million in FY25.

As the agency looks to transfer the Long Range Discrimination Radar to the U.S. Space Force, it is asking for $105 million, which would also include software development to improve discrimination capabilities.

♦ The Command and Control, Battle Management and Communications system, which provides the C2 for MDA’s global missile defense architecture, would get $517 million in FY25 to expand its ability to track hypersonic threats and tie into space sensors with views of advanced threats. The system would also support tying into the LRDR, according to the summary.

The agency is also budgeting nearly a billion dollars to fund threat representative targets and major tests including an experimental test of the initial defense of Guam architecture, Aegis Sea-Based Terminal test firing of an SM-6 against a hypersonic glide vehicle and an intercept test of the SM-3 Block IIA missile against a medium-range ballistic missile with exo-atmospheric countermeasures, the summary details.

While briefing reporters on the Pentagon’s new budget request, Deputy Secretary of Defense Kathleen Hicks said her signature initiative would cost a planned $1 billion, divided evenly between fiscal years 2024 and 2025.

Hicks debuted Replicator in August. The goal is to field thousands of drones while at the same time honing a process to do it all over again for other tech in the future. In her briefing, Hick emphasized that second aim, noting the first round of the program is intended to help the military services innovate faster and in larger numbers.

Whatever programs follow early Replicator work will likely require additional funding, she said.

“It is my fervent view that [the] follow-on to that is a significant investment potential that is not about Replicator,” she said. “That is about what the services are going to be able to do on autonomy once we’re able to lower those barriers through that initial investment.”

Just after Hicks finished speaking, Pentagon Comptroller Mike McCord detailed how the department might get the $1 billion.

There are two options. First, Congress could include the first $500 million in its long-delayed FY24 Pentagon budget. Working toward this goal, McCord said, Hicks has been speaking with the defense committees on Capitol Hill.

The backup plan, McCord said, is a reprogramming request — in which the Pentagon asks the defense committees for permission to shift money around in its budget.

In FY25, the $500 million for Replicator is already in the budget. McCord, though, did not say where that money is, other than to say it’s classified.

In a briefing Friday, Rear Adm. Ben Reynolds, the Navy’s budget deputy, told reporters multiple times the service’s request includes funding for Replicator projects.

Days after the briefing, a spokesman from the service issued a correction. Reynolds, it said, “conflated” money intended for other projects with money for Replicator.

“We are not currently discussing specific numbers associated with Replicator,” the correction read.

The Army in a separate briefing with reporters wouldn’t comment on its share of the program. And an Air Force spokesperson confirmed the service wouldn’t be spending any money on it in the coming fiscal year.

Meanwhile, the Pentagon’s overall budget slides say “Replicator does not have a specific funding line,” though “the FY 2025 Budget includes resources to boost the number of Replicator investments.”

This followed a page focused on other Pentagon innovation programs — each listing a specific dollar figure.

The Pentagon’s stated reason for its ambiguity around the program is that it doesn’t want China to know what it’s up to. Some in Congress and the defense industry have criticized that ambiguity, saying it’s not yet clear whether Replicator is more than a good idea with ambitious goals.

McCord said that posture will likely stay the same for now.

“We’re leaning on the side of not disclosing the details until we are confident that that’s what the deputy secretary wants to do,” he said.

The top line for national defense is $895.2 billion, and the Pentagon’s share of that will be just under $850 billion. These figures are lower than projected in the request for fiscal 2024, due to a deal struck to avoid a government default.

That deal capped spending for the upcoming fiscal year, amounting to a small drop in defense funding when adjusted for inflation. Hence the inevitable question leading up to this year’s request was what accounts would have to slim down. The answer is mainly those for procurement and research, development, testing and evaluation. The previous year’s ask for those accounts was $315 billion. This year’s is $310.7 billion, and that doesn’t account for inflation.

Divided out, the total includes $167.5 billion for procurement and $143.2 billion for RDT&E for FY25. Among the weapons systems trimmed to reach that lower-than-planned number are a Virginia-Class nuclear-powered submarine and a slew of F-35 fighter jets. The request for munitions also fell slightly — to $29.8 billion from $30.6 billion in FY24.

Every year’s budget request is a planned, but not final, roadmap that adjusts to direction from Congress. This year’s is even less certain, since the FY24 budget cycle has yet to close and could force more detours.

Congress has yet to pass an FY24 defense budget, now almost six months into the government fiscal year, which started Oct. 1. For the Pentagon, this presents two major risks: a full-year continuing resolution and the threat of a sequester. According to last year’s default deal, if lawmakers fail to pass all of their annual spending bills by April 30, there will be an automatic government-wide spending cut of 1%.

At the same time, the Pentagon is also trying to plan around a mammoth national security supplemental that’s also frozen in Congress. The bill contains billions in aid for Ukraine, Israel and Taiwan along with money for the American defense industry. The department is counting on that money in part to continue support its partners in need during wartime and to pay back some of its own bills. Those include a more costly force presence in Europe during the war in Ukraine and some of the cost incurred by U.S. Central Command after war broke out in the Middle East.

The department has about a $10 billion bill outstanding to replenish munitions sent to its partners around the world, said a senior defense official briefing reporters on the budget.

“The big issue before us is: Is Congress going to pass the supplemental or not?” the official said.

Last week, at a conference hosted by the defense analysts McAleese and Associates in Washington, ranking member of the House Armed Services Committee Rob Wittman, R-Va, said that the House wouldn’t act on that supplemental until its other spending bills have passed.

And while the Pentagon hasn’t drafted another supplemental request in this budget, it may well need one this year to pay for its bills being totaled in Europe and the Middle East.

“That would be a later decision,” the official said.

A blip or a trend?

Because of the confusion around this fiscal year’s budget, the department had to make careful assumptions about how Congress will act in the near future.

One example is aid to Taiwan. For the first time, the official said, the FY25 budget includes funding to replace weapons sent to Taiwan, starting at $500 million. The official said the Pentagon would have preferred to make that closer to $1 billion — the yearly amount its allowed to donate — but was more conservative because of this year’s spending caps.

The $500 million will go to Taiwan regardless of whether Congress gives the department extra money to do so — like a vacation that would come out of one’s saving account if they didn’t get a raise. There’s money for such a drawdown in the supplemental, and the department is framing its own commitment as a gesture to Congress.

“We, knowing that the authorization [to donate kit to Taiwan] is there and wanting to show that we agree with it, have made the decision to put some money in whether or not the supplemental passes,” the official said.

Another case is the Pentagon’s account for munitions. The previous budget requested money to issue a set of seven long-term contracts for precision weapons in an effort to give the defense industry a steadier long-term commitment. This budget assumes that Congress will approve those five-year contracts, the official said, and hence doesn’t ask for any more.

“With almost everything [we are] not trying to guess exactly what they’re going to do but have predicated that they’re ... going to largely approve what we asked for,” the official said.

Perhaps the biggest assumption is the department’s expectations for its budget in future years. The slide used to show their estimates is nearly the same as the previous year’s, except instead of a steady rise from FY24 on it has a divot that reflects this year’s spending caps.

But the ceiling only lasts one year, and the Pentagon plans to return to funding projections from before the default deal going forward. In other words, the department considers its FY25 top line a blip not a trend.

“We don’t have any insight into what that next two-year [debt ceiling] deal might look like, so that could get revisited,” the official said. “But our message is that we need to get back on plan.”

The fiscal 2025 budget request unveiled March 11 is about $1 billion more than the Biden administration’s previous ask. It is also up from fiscal 2023, when it sought $11.2 billion.

The department is prioritizing all things cyber as competition with Russia and China grows increasingly digital. All three world powers are well known for their virtual arsenals and their desire to poke and prod without triggering armed conflict.

“The FY25 cyber activity budget focuses investments in three portfolios, covering cybersecurity, cyberspace operations and cyber research and development,” a senior defense official told reporters at the Pentagon. “Cyber capabilities will continue to be a critical component of our national defense and, accordingly, a priority in our budget.”

The Defense Department has since 2015 experienced more than 12,000 so-called cyber incidents, with annual totals steadily declining since 2017, according to a Government Accountability Office report. Defense contractors are also victims of infiltrations; their intellectual property is a top target of foreign hackers.

How US Navy leaders see power evolving at ‘dawn of the information age’

To further insulate its sensitive information, the department is pursuing zero trust. Unlike older cybersecurity paradigms, zero trust assumes networks are always at risk or are already compromised, requiring constant validation of devices, users and their virtual reach.

The fiscal 2025 blueprint allocates a little more than $977 million for zero-trust transition. It also features nearly $300 million for modernized identity, credential and access management, or ICAM, a means of tailoring what information is available to a person while also keeping tabs on those plugged in.

“The cybersecurity budget request improves our cyber posture by funding the development and modernization in cybersecurity tools and capabilities and also expands investment in zero-trust technology to ensure the department can fully secure and protect” its assets, the senior official said.

A baseline level of zero trust across the department is required by 2027. Additional protections, dubbed advanced zero trust, are required down the line. Cybersecurity leaders have in the past said the looming deadlines will be challenging to meet.

The difficulty is that Replicator requires disruptive innovation — innovation that rapidly introduces new concepts and/or technologies, and significantly changes the operational level of warfare. This is exceptionally hard and should not be confused with the incremental evolutionary innovation that the DoD historically exploits in peacetime. Critically, emerging technology and creative warfighters can rapidly disrupt traditionally dominant forces, such as in the spectacular example playing out in Ukraine.

The good news is that the DoD has recent successes.

In 2022, the Navy began a two-year experiment known as the Unmanned Task Force. While much of the UTF effort was classified, it operationalized and fielded multiple disruptive capabilities to the naval and joint forces. This success is being institutionalized as the Navy’s new Disruptive Capabilities Office and will directly support Replicator.

Key to the UTF’s success was unblinking adherence to four principles:

1. Solve problems, don’t meet requirements. Starting with requirements constrains thinking and immediately eliminates options because it begins with a solution rather than trying to solve the problem itself. It also takes many years, involves organizational politics and includes individuals far removed from today’s problems.

The UTF focused on problems identified by four-star combatant commanders and further refined their detail with the operational community. While the warfighters are the experts in the operational problems, they rarely have bandwidth to dive deep into every facet of every problem they face or to optimize their problem articulation for the innovation ecosystem. This was a critical functionality performed by the UTF.

2. Protect, incentivize and embed the innovators. An organization’s primary innovation activities (i.e., its evolutionary innovation activities) will destroy all attempts to innovate disruptively. This isn’t because of stodginess or bad behavior — it’s by design.

Because evolutionary innovation seeks to improve the status quo while disruption seeks to overthrow it, the bulk of an organization will see disruption as misaligned, attempt to kill it and assimilate its resources. A common reaction to this tendency is to isolate the innovation group. This is a mistake. Organizational separation will give the innovation group speed and agility, and build barriers ensuring their fruits are impossible to leverage.

To this end, the UTF did two rare, seemingly counterintuitive things. First, it remained physically located inside the Pentagon and vehemently fought all attempts to relocate to more so-called innovation-friendly settings. Second, it remained administratively located in the Navy’s resourcing and requirements organization. While these choices throttled the UTF’s tactical speed and agility, the strategic gains from always having a seat at the table were a cornerstone of its successes.

3. Experiment early, incrementally and only against actual hypotheses. Experimentation is too often confused with testing. Cost-performance-schedule cultures typically conduct tests (often mistakenly called experiments). In a test, failure is an undesired result, and those championing failure lose credibility and resources. In an experiment, an undesired result is a learning experience, and organizations that learn fastest typically prevail (not those that fail fastest).

A gold standard for early, incremental, hypotheses-based experimentation is the NASA lunar landing program that conducted many launches from 1961 to 1972. All launches were against explicit learning objectives, and many produced arrays of unexpected lessons that shaped the next experiments. The UTF emulated this approach by jumping to experimentation with users, existing technologies and explicit hypotheses before any development was initiated. This was contrary to traditional procedures.

4. Optimize for discovery and speed, not for efficiency or scale. Clayton Christensen defined the difference between crux evolutionary innovation and disruption as seeking to improve the current business model versus searching for a new one. Improving a business model is the realm of process improvement such as Lean Six Sigma or the Toyota Production System where finding and scaling efficiencies is paramount.

Searching for a new business model requires nearly the opposite behavior. The key insight is that disruption has an unknown end state. Thus, it involves an iterative search for true customer pain points and rapidly iterating potential solutions. This requires different processes, risk tolerances, organizational configurations and cultures.

To this end, the UTF rejected a one-size-fits-all innovation approach. In one example, the UTF’s primary contributions were shepherding and funding incremental experimentation to eventually hand off to others. In another, it was distilling insight from an operational problem, finding relevant solutions in other operational communities, and shepherding the matchmaking process. In yet another, it was a year of daily, small-scale skirmishes against political and organizational antibodies to allow the disruption sufficient time to prove itself on its own merits.

While these activities were directly driven by the UTF’s standardized innovation process, the tactical execution was adapted to the unique nature of each operational problem and user base.

Disruptive innovation inside any large organization is extremely hard. Few organizations have shown they can sustain disruptive innovation over time. Most militaries excel at disruption during wartime but struggle in absence of an existential threat.

Nevertheless, the DoD has recent successes to leverage for Replicator. The question remains: Which path will the DoD choose?

Jason Stack is the chief technology officer and co-founder of a dual-use maritime logistics startup and a senior adviser at the consultancy BMNT. He co-founded the U.S. Navy’s Unmanned Task Force and previously served as the deputy director.

Air Force Lt. Gen. Heath Collins, the agency’s director, said March 7 at the McAleese & Associates conference that the agency was told by the Pentagon it would not conduct its usual briefing as part of Monday’s formal rollout. He referred questions to the Defense Department.

Collins noted he’s working with his staff on finding another forum to detail its budget request, adding that the agency would “still make sure” to “get the appropriate information out.”

Several reporters and analysts recalled MDA budget briefings took place as long ago as the early 2000s.

When asked about the decision, Pentagon spokesman Chris Sherwood declined to confirm it.

“We will not preview content or briefers before the president’s budget release,” he said. “The undersecretary of defense (comptroller)/chief financial officer will decide which departments and agencies brief their respective budgets during the DoD budget rollout press conference.”

This year marks the first budget cycle in which Collins is leading MDA. President Joe Biden tapped Collins to be MDA director in May 2023; he succeeded Vice Adm. Jon Hill, who had served as the agency’s leader since 2019.

Collins did not officially take command of the agency until Congress confirmed him in December, after Sen. Tommy Tuberville, R-Ala., released a lengthy blanket hold on military officer confirmations.

Last year, MDA sought a budget of $10.9 billion, prioritizing regional and homeland missile defense with a major focus on building an air and missile defense architecture in Guam.

The agency is in the midst of major modernization efforts to keep up with the pace of emerging, complex threats. This includes developing a Next Generation Interceptor to replace Ground-Based Interceptors that make up the roughly 20-year-old Ground-Based Midcourse Defense System. That system protects the homeland from potential intercontinental ballistic missile attacks from countries like North Korea and Iran.

The agency is also working on a Glide Phase Interceptor to defeat hypersonic missile threats farther from intended targets.

Noah Robertson contributed to this story.

“No U.S. boots will be on the ground,” Biden said. “A temporary pier will enable a massive increase in the amount of humanitarian assistance getting into Gaza every day. And Israel must also do its part. Israel must allow more aid into Gaza and ensure that humanitarian workers aren’t caught in the cross fire.

“To the leadership of Israel I say this: Humanitarian assistance cannot be a secondary consideration or a bargaining chip.”

Senior administration officials told reporters earlier Thursday the mission would route humanitarian aid through Cyprus to the temporary port in Gaza. The White House is also pushing Israel and Egypt to allow more aid through the land crossings at Rafah and Kerem Shalom.

The announcement, which drew bipartisan applause from lawmakers gathered, came amid calls from Biden for Congress to pass his long-stalled foreign aid bill to arm Israel, Ukraine and Taiwan.

The Senate passed the $95 billion foreign aid plan by a 70-29 vote in February. It includes $14 billion in Israel military aid, $48 billion in security assistance for Ukraine and $4 billion to arm Taiwan.

Israel receives an annual $3.8 billion in U.S. military aid, but the White House has said the Defense Department lacks the replenishment funds needed to continue arming Ukraine from U.S. stockpiles.

There’s also $2.4 billion in the bill for U.S. Central Command to respond to the uptick in attacks on American forces since the Israel-Hamas war began in October 2023; as well as $542 million for U.S. Indo-Pacific Command in response to its fiscal 2024 unfunded priorities list.

House Speaker Mike Johnson, R-La., has so far refused to put the bill on the floor amid growing resistance to additional Ukraine aid from Republican lawmakers as well as opposition from former President Donald Trump, the frontrunner in the GOP presidential primary race.

“Now assistance to Ukraine is being blocked by those who want to walk away from our world leadership,” said Biden, invoking former Republican President Ronald Reagan. “Now my predecessor tells Putin ‘do whatever the hell you want.”

The reference to Trump’s remarks at a campaign rally last month in which the former president voiced frustration with some NATO allies underspending on defense drew “boos” from Republicans in the crowd.

“Send me the bipartisan National Security Bill. History is watching,” Biden said, staring down Republican members of Congress who have opposed the measure. “If the United States walks away now, it will put Ukraine at risk, Europe at risk, the free world at risk, emboldening others who wish to do us harm.”

Biden also promised a strong response to other national security threats, including strikes to degrade Houthi capabilities in the Red Sea. “As commander in chief, I will not hesitate to direct further measures to protect our people and military personnel.”

Despite limited details about the plan for a humanitarian port, the idea drew immediate praise from Senate Armed Services Committee Chairman Jack Reed, D-R.I., and fellow panel member Angus King, I-Maine, who last week urged the administration to deploy a Navy hospital ship to the region.

“The civilian suffering in Gaza must be alleviated, and a maritime aid route will enable large quantities of food, shelter, and medical supplies to be delivered to those who need it most,” the pair said in a statement. “This temporary port, along with the ongoing airdrop campaign, will help ease the humanitarian crisis in Gaza.”

He wanted the conservative think tank’s help mustering public and congressional support for a $1.4 trillion defense budget, nearly 50% higher than fiscal 2023 spending levels.

The Mississippi Republican said this figure, equal to 5% of U.S. gross domestic product, is necessary given multiplying threats across the world.

“The U.S. should lead in the Indo-Pacific,” he said. “The U.S. should lead in Europe. The U.S. should lead in the Middle East. This is our official strategy. The U.S. should seek to win, not just manage, against China and Russia. The U.S. should deter Iran and North Korea and terrorist groups.”

The senator’s appeal was quickly followed by a panel with three speakers, all with ties to former President Donald Trump, who questioned the size of the current defense budget, much less a 50% increase, and argued the U.S. can’t do it all.

“Our military is not what it should be, despite spending almost $1 trillion,” said Elbridge Colby, a former deputy assistant secretary of defense who helped develop Trump’s National Defense Strategy.

The contrast between Wicker’s push and the skepticism of many Republicans promises to create new complications as the U.S. defense budget surges toward $1 trillion.

Last year’s debt ceiling agreement caps the FY24 defense top line at $886 billion, though the Pentagon and all other agencies face a 1% cut if Congress does not pass a full FY24 budget by April 30. Even so, FY24 defense spending could balloon as high as $953 billion if Congress also approves President Joe Biden’s foreign aid request for Ukraine, Israel and Taiwan.

As the Pentagon seeks to address these new wars along with consistently rising costs like salaries and health care for troops and civilians, the $1 trillion figure may draw new scrutiny to the defense budget, including questions about where to cut and where it’s falling short.

It’s a figure that seems far too large to some Republicans aligned with Trump’s America First policy and progressive Democrats. It’s also an amount that falls more than $400 billion short of what some defense hawks say the Defense Department needs to meet its many commitments.

Mark Cancian, a senior adviser at the Center for Strategic and International Studies think tank, told Defense News the $1 trillion figure, while symbolic, will pose “a major decision for the next administration.”

“If it’s a Trump administration, everything’s up in the air. But even if it’s a Biden administration, I would argue — many people would argue — that their strategy is underfunded,” Cancian said. “They have this very robust strategy, and they just aren’t putting the money against that.”

Even if Congress chose to keep the defense budget flat, it would soon approach $1 trillion in the next few years to keep up with inflation.

And cuts would be challenging; the Republicans and progressive Democrats advocating to cut $100 billion or more from the defense budget would confront a host of thorny complications that range from personnel to readiness to acquisition policy.

“A $1 trillion figure is attention-grabbing, and it will cause people to start asking some hard questions about what the nation’s return on investment is for its $1 trillion in spending,” said Travis Sharp, a senior fellow at the Center for Strategic and Budgetary Assessments. “The way the $1 trillion budget gets presented, and the types of things it’s measured against, will become pretty important in terms of the political and popular support for that level of spending.”

‘We already spend $1 trillion’

The U.S. today spends more on its military and weapon systems than the next 10 countries combined, including China and Russia, according to data compiled by the Stockholm International Peace Research Institute in 2023.

Cancian — who worked in the White House’s Office of Management and Budget during the Obama administration — estimates defense spending would have to increase by roughly $25 billion annually to keep pace with inflation. This means the U.S. is on track to reach a $1 trillion defense budget within the next few years, regardless of supplemental spending.

And that’s just discretionary defense spending, which excludes mandatory bills such as veterans’ benefits.

“By almost any other metric, we already spend $1 trillion a year on defense,” said Geoff Wilson, who leads the Center for Defense Information at the Project on Government Oversight, an independent watchdog. “We’re one of the only countries that views this as a separate line item.”

At the same time, the Defense Department has trouble tracking its $3.8 trillion in assets, failing its sixth consecutive audit last year. The Marine Corps became the first, and so far only, armed service to pass an audit in February.

“Given all these costly failures and this abhorrent track record of fiscal accountability in the military-industrial complex, how much more defense are taxpayers actually going to get?” Wilson asked. “I don’t think just throwing another $200 billion at the problem is going to fix everything else. The industrial base has been unable to absorb the defense budget it already has.”

Over the last decade, defense priorities have largely received bipartisan support. During the Trump administration, the defense budget continued to grow.

But former Trump administration officials and many Republicans have started to chafe.

For the first two years of the Biden administration, Republicans worked with centrist Democrats to significantly boost the White House’s defense budget requests. The defense budget stood at $740 billion when Biden took office in FY21 and rose to $858 billion in FY23, excluding an extra $35 billion in Ukraine military assistance that year.

“That’s a lot of money that we spend — over 3% of GDP — on defense,” Colby, the former Pentagon official, said at the Heritage event. “A lot of it is for reasons that are understandable … personnel costs, the higher cost of our defense-industrial base, the industrialization in general. At the same time, you’ve got to look at the fact that there are very real political constraints.”

Colby has called for a focus on the Indo-Pacific region to deter China from attacking Taiwan, and pushed for NATO allies to spend 2% of their respective GDP on defense. For his part, Trump has threatened to withdraw from NATO over numerous members’ failures to meet the 2% benchmark set by the alliance.

Republican hawks derided Biden’s $886 billion defense budget request last year as failing to keep pace with inflation, only to lock it in as part of the debt ceiling agreement. Five months into the fiscal year, Congress has yet to pass a full FY24 budget.

The debt ceiling blueprint provides the Defense Department with more discretionary funding than all other federal agencies combined. When Republicans last leveraged a debt ceiling raise in exchange for discretionary spending caps under the Obama administration, Democrats insisted on equal amounts of both defense and nondefense spending.

Sharp, the budget analyst, said because the 2023 debt ceiling agreement “starts out with uneven caps, the parity principle doesn’t really apply as much, which suggests that defense is coming under less fiscal pressure than it could.”

Under the Obama administration, the Pentagon and Congress routinely circumvented defense budget caps through a fund known as overseas contingency operations, billed as a spending account focused on the wars in Afghanistan and Iraq.

Biden eliminated this account in his FY22 budget. But following Russia’s full-scale invasion of Ukraine in February 2022, he has used Ukraine aid packages to similarly increase defense spending beyond the base budget, with much of the money going to Pentagon contractors backfilling U.S. equipment sent to Kyiv.

Now, a group of Republicans wants to put the brakes on the foreign aid packages that have constituted significant defense spending increases outside the base budget.

“We just want the country to have a conversation about the strategy of spending,” Robert Greenway, the new head of Heritage’s Center for National Defense, said in September on a podcast. “We’re probably knocking on the door of a couple hundred billion dollars on Ukraine.”

‘A budget that is too low’

Amid bloody wars in Europe and the Middle East as well as the specter of a potential Indo-Pacific conflict, the Biden administration has rushed arms to Ukraine and Israel, and it seeks to do the same for Taiwan.

Biden’s latest Ukraine military aid request is his largest yet and includes security assistance for Israel and Taiwan. The foreign aid bill the Senate passed 70-29 in February for all three security partners and other Defense Department priorities would total $67 billion in extra Pentagon spending for FY24. If the House passes that bill as well as a full defense budget, it would put FY24 defense spending at $953 billion.

However, House Speaker Mike Johnson, R-La., has refused to put the bill on the floor for a vote amid opposition from Trump.

Growing congressional concerns, fueled in part by Trump’s presidential campaign, mean the Pentagon may be unable to rely on additional funds to boost its base budget the same way it did during the Iraq and Afghanistan wars.

But even after the large defense spending increases in recent years, some analysts argue the Pentagon’s strategy remains underfunded.

“The current strategy, which is pretty consistent with what the Trump administration had and with what the Obama administration had, calls for engagement in Europe; a response to Ukraine; a continued presence in the Middle East, although reduced at least; and China as the pacing threat — but also nuclear modernization; a strong, all-volunteer force; a vibrant defense-industrial base,” Cancian said.

“You stick all that together — that’s very expensive.”

An extra $26 billion in Ukraine military aid for FY22 brought total defense spending that year to $804 billion. Then in FY23, an extra $35 billion in Ukraine military aid brought total defense spending to $893 billion.

“The future of America’s national security faces two huge challenges: an outdated defense strategy and a budget that is too low to support it,” Elaine McCusker, a senior fellow at the conservative think tank American Enterprise Institute, wrote in February. “These factors include an industrial base that is inadequate to meet our needs and stalled emergency spending that includes a long overdue revitalization of our defense production capacity for crucial platforms such as submarines and ships.”

But with Trump increasingly likely to win the GOP presidential nomination, some Republican defense hawks have become wary of lining up behind Ukraine aid ever since Congress passed its last package for Kyiv in December 2022.

Sen. Lindsey Graham, R-S.C., voted against the Senate bill in February, endorsing Trump’s proposal to issue the foreign assistance as loans. Graham’s position marks an about-face from nine months ago, when he made his vote on the debt ceiling deal contingent on passage of a defense spending package for Ukraine to circumvent Biden’s $886 billion military budget top line.

The Heritage Foundation, which has spearheaded the Project 2025 policy document for a future Republican president, has also lobbied against additional Ukraine aid.

Trump’s former acting Defense Secretary Christopher Miller authored the document’s section on the Defense Department, which lambasted the Pentagon for “wasteful spending, wildly shifting security policies [and] exceedingly poor discipline in program execution.”

The Project 2025 transition document doesn’t recommend a specific defense budget top line, but Miller wrote in his memoir last year the U.S. should cut military spending by 40% to 50% to “end American adventurism and retool our military to face the challenges of the next century.”

Meanwhile, several progressive Democrats in the House have come out against the bill’s extra $14 billion for the Israeli military amid the humanitarian catastrophe in the Gaza Strip.

“If the proposed increase were coming as part of the base budget, it wouldn’t attract potentially some of the controversy that supplementals have because base budget spending isn’t always so tightly connected to a security situation occurring in a specific part of the world that people can have strong opinions about,” Sharp said.

‘The status quo is very rigid’

During his first three years in office, Trump proposed large defense increases, in line with his National Defense Strategy, which called for 3% to 5% real budget growth above inflation. But in 2020, his final year in office, Trump proposed a flat defense budget.

For the past several years, progressive Democrats, led by Reps. Barbara Lee of California and Mark Pocan of Wisconsin, have introduced a bill to cut $100 billion in defense spending, though it has failed on the floor.

“The reason that’s delusional is not that you can’t save money with efficiencies or changes in overhead,” Cancian said. “The problem is that all of them are politically difficult, and you have to expend political capital to get those efficiencies. And that’s where the White House typically stops.”

Sharp said it would be possible to eliminate budget inefficiencies and find savings in a theoretical exercise that rebuilds the Defense Department from scratch, but cutting $100 billion in a single year would be a tall order.

“It’s a purely academic exercise mostly because transforming situations in those ways is — I don’t want to say impossible, but it’s extraordinarily difficult,” he added. “The status quo is very rigid.”

The Heritage Foundation and the American Enterprise Institute convened a conference last year to identify savings and efficiencies in the defense budget. The conference’s report proposed potential savings over the long term, but cautioned there’s “no easy button” to press.

“Defense inefficiency is often marbled within the budget across programs, accounts, services and agencies,” it stated.

The report recommended some actions that have previously run afoul of parochial headwinds in Congress, such as base realignment and closure. It noted five previous rounds of base closures saved the Defense Department $12 billion annually. Congress rejected the base closure attempt the Trump administration proposed in 2017.

The largest portion of the Pentagon budget goes toward operations and maintenance, which covers equipment repair and training costs, among other items like some health care costs.

McCusker, who served as acting Pentagon comptroller in the Trump administration, estimated roughly $109 billion within Biden’s FY23 defense budget proposal did not go directly toward core military functions.

“Along with increasing costs of health care, benefits and compensation, the true cost of military capability is disguised and squeezed out by these and other priorities,” she told Defense News. “For example, the [operations and maintenance] appropriation is loaded with spending on health, community, family, climate, education and security assistance programs.”

The next largest category is personnel, including troop payment and retirement benefits for the all-volunteer force. Congress authorized a 5.2% troop pay raise in December when it passed the annual defense policy bill, the largest salary boost in 22 years.

The third is procurement, and defense contractors frequently come under fire for systems hit by delays and cost overruns.

“All you have to do is look at the last 20 years of major weapons developments: the F-35 [fighter jet]; the LCS, or littoral combat ship; the Zumwalt-class destroyer; the Ford [aircraft carrier],” said Wilson, the Project on Government Oversight analyst. “They’ve all been over budget and behind schedule. And this is not only a real cost; it’s a cost on readiness.”

For instance, the submarine-industrial base has been unable to keep up with the Navy’s goal of producing two Virginia-class submarines and one Columbia-class submarine per year. The delays stem in large part from labor shortages and pandemic-related supplier issues.

Wicker inserted another $3.3 billion in the Senate’s foreign aid supplemental to address these challenges.

Sens. Bernie Sanders, I-Vt., and Chuck Grassley, R-Iowa, introduced a bill with eight other Democrats and Republicans last year that would require any part of the Defense Department to return 1% of its budget to the Treasury for deficit reduction if it failed to pass an audit.

Grassley previously chided the Pentagon for spending $10,000 per toilet seat for a fleet of aircraft, saying that “the Department of Defense has been plagued by wasteful spending for decades.”

The Defense Department’s troubled bookkeeping practices can make tracking and eliminating waste a difficult endeavor.

Service contracts for things like administrative and technical support account for roughly half of all Pentagon contracting. But a 2023 Government Accountability Office report found the Defense Department did not fully collect and review data for service contracts that ranged from $184 billion to $226 billion annually from FY17 through FY22. Although the Navy collects and reviews this data, the report said the Army and Air Force do not consistently do the same.

While it’s unclear how much money the Pentagon could find by eliminating waste, pressure to get its fiscal house in order will likely increase as the defense budget nears $1 trillion. In the meantime, any significant defense budget cut may require the U.S. to reexamine its role in the world.

“There are a lot of things that you could do to save money, but you have to have a different strategy,” Cancian said. “You can save $100 billion, but you cannot have the current strategy. And for the Europeans, for Israel, for our allies in the Middle East, this would be a radical change.”

The Pentagon needs to replace its entire resourcing process or it risks falling behind its top adversary: China.

This was the assessment of a group Congress mandated to study the Defense Department’s Planning, Programming, Budgeting and Execution system, better known as PPBE.

The process has been in place since the 1960s and guides how the Pentagon requests and spends money. After studying it for two years and conducting more than 400 interviews, the commission found the current system doesn’t meet the Defense Department’s needs.

“Given strategic adversaries, given the posture around the world right now, I’m not sure our current system is able to meet the current threats,” said Ellen Lord, the commission’s vice chair and the Pentagon’s former top acquisition official.

The opinion rests on two pillars.

First is America’s competition with China, which the Pentagon says is moving at a pace it needs to match. In the last 20 years, China has massively built up its military and invested in strategic sectors of its economy, such as drones and artificial intelligence. The Defense Department’s resourcing system can’t move at the speed required by this threat, especially when considering the other ones America faces around the world, the report argues.

The second change is in technology. Specifically, the commission says the defense sector no longer leads innovation; instead, the commercial sector does, especially in fields such as artificial intelligence and robotics. That shift makes it more important to have a resourcing process that can adopt commercial advances, something the commission says PPBE does poorly.

The result, per the report, is a process both antiquated and cumbersome.

“One of the most consistent concerns the commission heard over the past two years is that the current PPBE process lacks agility,” the report reads.

Instead, the commission proposes scrapping the old process in favor of a new one, which they call the Defense Resourcing System. It would have three parts: strategy, resource allocation and execution.

Most changes would occur in how resources are spent, organizing the budget around capability areas — such as tactical aviation — rather than spending categories like research and development. The intent is to create a more nimble system that better matches the Pentagon’s strategy.

The almost 400-page report covers five core areas: better matching budgets and strategy, faster innovation, improving the Pentagon’s relationship with Congress, updating business and data systems and a better workforce.

These areas include a further 28 recommendations, which sit on a spectrum from easy to adopt to aspirational.

On the easier end are changes that sit within the Defense Department’s control, such as improving the department’s plodding data systems that make it difficult to answer questions from Congress, said Lord. Improved data systems overall were one of her top priorities, she said.

On the other are recommendations that would require the approval of all the stakeholders in PPBE, such as changing the process altogether. That reform, even if it gets the necessary support, could take around three years, the commission estimated.

Implementation

“I am a huge advocate of making big changes,” Lord said, speaking at a Wednesday breakfast hosted by the Defense Writers Group.

To do so, she and the panel’s other members are calling for Deputy Secretary of Defense Kathleen Hicks to issue a memo with implementation guidance — outlining what can be accomplished in the short, medium and long terms.

Hicks already issued such a memo last year, covering initial recommendations, after the commission submitted an interim report to Congress. The department released an implementation plan for those early recommendations Wednesday.

To fully implement their recommendations, the panel says Hicks should form a team across the department that reports directly to her and is staffed for the next three to five years.

“The Department looks forward to evaluating the additional recommendations released by the PPBE Reform Commission today, in close cooperation with Congress, the Office of Management and Budget and other stakeholders,” Hicks said in a statement, also calling on lawmakers to pass a full Pentagon budget.

Congress too has already shown signs of support for some of the panel’s work. As an example, said commission aide Rachel Conway, the House and Senate appropriations committees on defense proposed higher thresholds for the Pentagon’s below-the-threshold reprogramming requests, which allow the department to shift around money without approval from Congress. The proposals aren’t yet final, but doing so is among the commission’s recommendations.

“These findings should help the Department develop new technologies in a streamlined, agile manner. We appreciate the Commissioners’ expert, bipartisan work, and we look forward to reviewing their findings,” the chair and ranking member of the Senate Armed Services Committee said in a joint statement Wednesday.

Congress still has yet to pass a defense budget, now six months into the fiscal year. To improve the relationship between the department and Capitol Hill, the report recommends more face-to-face communication between the two and a common set of data reports that both sides can access.

Ultimately, said Lord, the challenge in implementing the report will be that relationship, and the longstanding balance between oversight from Congress and freedom for the Pentagon to make changes.

“We believe we have a substantive document here with 28 very important recommendations,” she said. “That will all be for naught if we do not have implementation guidance from the department as well as language from Congress.”

These hinge on four related variables:

Who wins the White House? Former President Donald Trump regards increased defense spending as one of his signature achievements. If reelected, he might look to reprise that record. He and President Joe Biden also could take very different approaches to Ukraine financial assistance via supplemental budgets.

Who controls Congress? If one party controls all three branches of government, it will have an easier time enacting its fiscal plans. Given the number of Democratic seats at stake this November, Senate control is likely to shift to Republicans in 2025-2026. The race for control of the House is a toss-up. A divided Congress is a recipe for continued dysfunction over the budget process.

Will there be fiscal constraints? The Fiscal Responsibility Act set caps on all discretionary spending in FY24 and FY25. The law could sequester the FY24 budget to 99% of FY23 enacted levels unless Congress acts by April 30. This would leave the DOD about 4.2% below the FY24 budget request. For FY25 and beyond, Congress could limit federal spending to cope with historic budget deficits and national debt.

What about supplemental budgets? In October, the White House requested $105.1 billion in supplemental funds — which are not constrained by the Fiscal Responsibility Act — to support Ukraine, Israel, U.S. submarine programs and other efforts. House Republicans are divided over Ukraine funding. Whether Congress uses supplementals to aid Ukraine and to skirt caps are critical variables.

There are some outliers who advocate spending outside these scenarios. For example, Sen. Roger Wicker, R-Miss., has called for defense spending equal to 5% of gross domestic product. On the other hand, Reps. Barbara Lee, D-Calif., and Mark Pocan, D-Wis., in February 2023 called for the FY24 defense budget to be $100 billion below the FY22 budget. But neither of these extremes has enough support.

Doug Berenson is a partner in the aerospace and defense practice at the consultancy Oliver Wyman.

Welcome to budget season 2024, the government’s split-screen effort to secure spending deals for two fiscal years at once. For the Pentagon, the moment is one of almost unique uncertainty.

“We’re in this bizarro world where there’s no budget, but amendments are [being] submitted” for the 2025 defense policy bill, said Mackenzie Eaglen, a defense expert at the American Enterprise Institute.

Looming over the budgeting process for the Pentagon is the threat of a full-year continuing resolution, or CR.

In a briefing with reporters last week, the undersecretaries of the Army, Navy and Air Force warned that such a scenario would hamstring their efforts to upgrade weapons systems and ramp up production.

“There is no playbook” if that occurs, Eaglen said, noting the Pentagon has never before operated under a yearlong CR.

The second threat is possible sequestration. If Congress doesn’t pass all its spending bills by April 30, there will be automatic 1% across-the-board budget cuts, per the terms of the Fiscal Responsibility Act, a deal struck last year to avoid a government default.

The president can choose to exempt military personnel spending — about a quarter of the Pentagon budget — from those cuts, said Seamus Daniels, who studies defense spending at the Center for Strategic and International Studies. That would mean sequestration would actually trim more than 1% for the other areas of defense spending, such as procurement.

Last week, Congress passed its latest short-term spending bill, which extends the deadlines to fund the government to March 8 and 22, leaving little more than a month of cushion before the April 30 deadline. Over the weekend, members of Congress released the text of a deal for six of its annual spending bills, which could pass by the end of the week.

‘No building here’

Still, the issues surrounding the FY24 budget will cloud the White House’s FY25 request, multiple experts on the defense budget told Defense News.

“It makes it difficult for the Biden administration to plan, not knowing what the final appropriations levels are going to be for defense programs in 2024,” said Daniels.

A full spending bill for one fiscal year and the administration’s request for another are meant to be staggered six months apart. This allows the White House to factor in Congress’ preferences from one budget cycle into another.

“They need to be six months apart so that one can build on the other,” said Mark Montgomery, a fellow at the Foundation for Defense of Democracies and former Pentagon official. “We’re having no building here.”

The Fiscal Responsibility Act capped spending increases for the entire government, including the Defense Department. In last year’s budget request, the administration projected the Pentagon’s overall funding would rise to $860 billion in FY25. Instead, its cap will be $850 billion, a 1% year over year decrease in spending, when adjusted for inflation, said Daniels.

That topline will likely compound the pressure on the Pentagon’s procurement accounts created by the delay in this year’s funding, said Eaglen.

Assuming Congress passes a defense budget in March, the department would have about six months to spend new money that was meant to be spread over an entire year. Because the Pentagon won’t dock personnel pay or lower readiness, that means the procurement accounts will probably suffer disproportionately, she said.

In the meantime, that account has been a major concern of Congress. Since FY16, lawmakers have been adding more money to the Pentagon’s procurement budget than the administration requested.

They’ve been doing so, in large part, to prepare for competition with China, which has been conducting an enormous military buildup in the last 20 years and now surpasses America’s ability to manufacture many major weapons systems.

The Pentagon’s guiding strategies in the last three administrations have focused correctly on this challenge, said Mark Cancian, also of CSIS. But the department doesn’t have enough money to properly execute that strategy, he said — and the budget delays and uncertainty this year don’t help.

On March 11, Daniels said he’ll be watching the budget request’s forecast for future years. The caps instituted by the FRA only last this coming fiscal year, which means the administration could project funding increases more in line with the estimates from previous budgets.

There’s also the question of the White House’s massive national security supplemental request, which passed the Senate in February, but has since stalled in the House. Because of the size of that bill — $95 billion — the Pentagon’s budget is unusually connected to a separate piece of legislation, Montgomery said.

Cancian said he doubts any of that funding will make it into the FY24 Pentagon topline, but the Defense Department has outstanding bills for its surge of support after the wars in Ukraine and Israel in the last two years and those bills need paying.

It’s not yet clear Congress will be able to pass a full appropriation this year. Because all of its funding bills need to be passed in order to avoid a sequester, the Pentagon needs to plan for that possibility even if it gets an FY24 budget, said Daniels.

“You don’t know necessarily what the sequester is going to be, if there is one,” he said. “So you’re just injecting a lot of uncertainty into the planning.”

The officials said that Naval Air Systems Command, which grounded the controversial tilt-rotor aircraft about three months ago, will lift it and allow the services to begin implementing their plans to get the Osprey back into the air. Austin met with the top service leaders, including for the Navy and Air Force, on Friday morning, according to the officials, who spoke on condition of anonymity to discuss plans not yet made public.

Air Force knows what failed in fatal Osprey crash but not why

The Osprey has been grounded for almost three months following a Nov. 29 Air Force Special Operations Command crash in Japan that killed eight service members. The Japan incident and an earlier August Osprey crash in Australia that killed three Marines are both still under investigation. The Air Force has said that it has identified what failed in the Japan crash, even though it does not know yet why it failed.

The decision to end the flight ban is up to Naval Air Systems Command, but Austin had asked for an informational briefing on the matter because of the significant safety concerns and the fact that three of the services and a critical ally are involved in the program. While Austin does not have approval authority in the return to flight process, U.S. officials said his endorsement of the services’ plan was considered a key step.

In the months since, the services have worked on plans to mitigate the known material failure by conducting additional safety checks and establishing a new, more conservative approach to how the Osprey is operated.

Five months into the fiscal year, which began Oct. 1, lawmakers have yet to pass a full FY24 budget. The uncertainty has raised concerns in the Pentagon that Congress may put the department on a one-year continuing resolution with a 1% sequester.

Without an FY24 defense budget, the Pentagon remains unable to implement new modernization programs and cannot take new steps to expand the defense-industrial base amid wars in Europe and the Middle East.

“The lack of full-year funding has put key government programs in purgatory, wasted taxpayer money on outdated budgets and hindered forward progress that will make the country more secure, push us to the next levels of technological advancement and support American competitiveness in key industries like aerospace,” Aerospace Industries Association chief executive Eric Fanning said in a statement.

The House voted 320-99 to pass its fourth temporary spending measure, and the Senate followed suit shortly thereafter in a 77-13 vote. Under the latest stopgap spending bill, funds appropriated for Veterans Affairs and military construction will expire on March 8, two weeks before Defense Department funding runs out.

Congress is expected to vote on the FY24 Veterans Affairs and military construction spending bill next week. But lawmakers have yet to finalize the FY24 Pentagon spending bill.

The right-wing House Freedom Caucus has insisted on several policy riders in the appropriations bill that Democrats have ruled out as poison pills, including bans on the Pentagon’s abortion travel leave policy and medical care for transgender troops.

Last year’s debt ceiling deal caps FY24 defense spending at $886 billion. If Congress does not pass a full FY24 federal budget by April 30, the debt ceiling agreement puts government funding on a one-year continuing resolution that would cut spending at the Pentagon and all other federal agencies by 1%.

Pentagon sounds the alarm

The undersecretaries of the Navy, Army and Air Force told reporters Wednesday a one-year stopgap funding measure at FY23 levels would result in billions of dollars in “misaligned” funds at the Defense Department.

To cope with a one-year stopgap measure, they said the Defense Department would first have to prioritize current operations in places like Europe and the Middle East, followed by personnel, then acquisition and modernization.

Navy Under Secretary Erik Raven noted this would result in the military submitting “unprecedented” reprogramming requests to Congress. The Navy, for instance, would need Congress to approve a $13 billion reprogramming request to address $26 billion in misaligned funds.

It would also result in a $2 billion shortfall for the Virginia-class attack submarine program and another $800 million shortfall for amphibious ship spending. Congress has provided a $2.2 billion carveout for the Navy to continue work on the Columbia-class ballistic submarine program, most at risk of falling behind schedule.

Other services would not be able to begin new initiatives either, including a highly prioritized munitions ramp-up following the influx of arms the U.S. has sent to Ukraine and Israel with more due for Taiwan.

“These are production rate increases, new starts — both in programs for acquisition as well as military construction projects — that we cannot start,” said Army Under Secretary Gabe Camarillo.

Congress has still not funded the multiyear munitions procurement plans it authorized for FY23 and FY24, and Camarillo noted those funds are needed “to give industry the incentive to be able to facilitize, invest in a workforce and be able to do those extra shifts that we know that we need in order to restore our munitions.”

The $95 billion foreign aid bill for Ukraine, Israel and Taiwan also includes considerable funding to ramp up the munitions-industrial base. But House Speaker Mike Johnson, R-La., has so far refused to put it on the floor for a vote after the Senate passed it 70-29 earlier this month.

For its part, the Air Force warned earlier this month a 1% sequester would reduce its buying power by $13 billion and put $2.8 billion in space modernization projects on hold.

A full-year continuing resolution that would keep fiscal 2023 spending levels through the rest of 2024 means the U.S. Army, for instance, would run out of operations and maintenance funding in the European theater as it trains Ukrainian soldiers to defend against Russia’s ongoing invasion of the country, which has entered its third year.

The financial strain is compounded by the lack of certainty over whether Congress will pass a supplemental funding package that would reimburse the Army for expenses incurred so far in bankrolling support to Ukraine.

The Army already spent $500 million in the European theater in operations and maintenance, and “we were counting on a supplemental to be able to sort of replenish us for that,” Army Secretary Christine Wormuth said at a Feb. 27 Defense Writers Group event. “What that means is probably by late spring, summer, we would have to make some difficult choices about other [NATO] exercises, for example, that our forces participate in.”

Additionally, the Army has been funding support to Israel to include deployments of units to the Middle East in the event they are needed, she added.

Army Under Secretary Gabe Camarillo told reporters Feb. 28 at the Pentagon that the service spent $100 million in U.S. Central Command’s area of operations as well as another $500 million to support the U.S. Southwest border security mission.

“I do worry. Our budget has been flat for the last couple years. We don’t have a lot of cash under the sofa cushions, and if we don’t get a budget and we don’t get a supplemental, we’re going to probably have to cancel some things,” Wormuth said.

The Army is prioritizing current operations, Camarillo said, which means it is “going to have to look to other areas of O&M spending where they “can potentially take some risk,” including “exercises and the degree to which we participate in some around the globe. We might have to scale some of that back in the absence of an appropriation this year.”

For the Air Force, Kristyn Jones, who is performing the duties of the service’s undersecretary, told reporters alongside Camarillo that in order to pay its personnel, training exercises would take the hit.

“Anything that’s already on a [Foreign Military Sales] case won’t have a dramatic impact, but all of the replenishment that we’re expecting in the supplemental is currently impacted. And even things like F-35 [fighter jet] training that we’re planning … with our allies and partners, that’s impacted by not having this appropriation as well.”

The Air Force is focused on trying to ensure flight hours are maintained, but it’s also important, Jones noted, that pilots receive training.

Despite the military’s experience in warfare, “we’re in a different strategic environment and we need to do the exercises, often joint and allied, to prepare for that environment. And the lack of our ability to do that doesn’t allow us to, again, to test the new techniques, the new military tactics that we’d like to have primarily for an Indo-Pacific fight,” Jones said. “That’s really where we need to stretch our muscles a little bit more.”

Learning from sequestration

With a possible extended or full-year continuing resolution, the service undersecretaries said the last time the military felt such a painful budget crunch was during the 2013 sequestration, where the services were required by law to make percentage cuts evenly across spending lines.

One of the fallouts of the 2013 sequestration was a rise in aviation mishaps because vital training flight hours were cut. Military Times and Defense News took a deep dive into aviation mishaps from FY11 through FY18 and uncovered the trend.

“Safety is always going to come first,” said Navy Under Secretary Erik Raven, “but we did look at the lessons of 2013 and sequestration, where we spread risk around the enterprise, and I think the concerns about maintaining ready and trained forces are part of the lessons that we’re using to inform if we get into this worst-case scenario where we don’t have our ’24 budget enacted and we are under a CR.”

“We’re not going to repeat that same peanut butter spread,” he added.

But trade-offs will be inevitable, he acknowledged, and “we’ll have to look across the board to see how to maintain the focus on current operations.”

One stopgap option would transfer additional weapons from U.S. stocks without funding to replenish that equipment. Another option uses the Excess Defense Articles program to send U.S. equipment to third-party countries that then send older weapons to Kyiv.

The European Union is also stepping up its assistance. It passed $54 billion in economic support for Ukraine after Hungary dropped its opposition.

But none of these stopgap measures to staunch the bleeding come close to the influx of arms for Kyiv that Congress could unlock if it passes the $95 billion foreign aid bill for Ukraine, Israel and Taiwan.

“The consequence of not doing so is likely Ukraine’s defeat,” Sen. Chris Murphy, D-Conn., told Defense News last week after returning from a congressional delegation to Europe. “There is not a plan B there. There’s certainly more that Europe could do, but there are certain weapons systems that only the United States can provide and maintain. And there is a hard limit to the amount of resources Europe can put in if the United States chooses to leave the coalition.”

Ukrainian officials also attributed Russia’s recent conquest of Avdiivka to the lack of available weaponry when Senate Majority Leader Chuck Schumer, D-N.Y., led a congressional delegation to the war-torn country last week.

House Speaker Mike Johnson, R-La., has refused to hold a vote on the foreign aid bill, which includes $48.3 billion in additional military assistance for Ukraine. The Senate passed the bill 70-29 earlier this month over objections from former President Donald Trump, the likely Republican presidential nominee.

Congress passed a cumulative $113 billion in military and economic aid for Ukraine after Russia’s full-scale invasion in February 2022, but has not provided additional funding since December 2022.

Biden hosted congressional leaders at the White House on Tuesday, where he joined Democrats and outgoing Senate Minority Leader Mitch McConnell, R-Ky., in pushing Johnson to pass the bill.

In the meantime, the Pentagon is weighing whether it should use roughly $4 billion left of drawdown authority to continue arming Ukraine from U.S. weapons stockpiles, even though it does not have the money to replenish those inventories without the foreign aid bill, CNN reported Wednesday.

The Pentagon did not directly address deliberations about transferring additional weapons without replenishment funding.

“The [Defense Department] continues to urge Congress to pass a supplemental to support Ukraine in its time of need and to replenish our stocks,” Pentagon spokesman Lt. Col. Garron Garn told Defense News in a statement.

The Pentagon used its last $1 billion in Ukraine replenishment funding to backfill U.S. stockpiles in December, with the White House noting that would be the last remaining assistance, absent congressional action.

“At issue here again is the question of impacting our own readiness, as a nation, and the responsibilities that we have,” Pentagon press secretary Gen. Patrick Ryder said last month. “While we do have that $4.2 billion in authority, we don’t have the funds available to replenish those stocks, should we expend that. And with no timeline in sight, we have to make those hard decisions.”

The remaining $4.2 billion in Ukraine transfer authority stems from an accounting error the Pentagon made last year. The error prompted Pentagon Inspector General Robert Storch to announce an audit of the valuation of weapons sent to Ukraine.

Excess Defense Articles

Another, more limited option involves third-party countries transferring Soviet-era equipment to Ukraine in exchange for more U.S. weapons through the Pentagon’s Excess Defense Articles program. The program also allows the U.S. to send equipment that helps countries transition away from Russian arms.

“The United States is providing security assistance to partners such as Ecuador and Zambia to help them transition off Russian equipment, but there’s more we can and must do,” the assistant secretary of state for political-military affairs, Jessica Lewis, said in December.

Ecuadorian President Daniel Noboa said in January that the U.S. would send $200 million in refurbished weapons to help fight cartels in exchange for “scrap” equipment. But Noboa backtracked last week after Russia imposed a ban on Ecuadorian banana and clove imports.

“To our surprise, the United States has publicly stated that this equipment will be used in the armed conflict in Ukraine, and we do not want to be part of it,” Noboa said.

The Greek newspaper Kathimerini reported in January that the U.S. is providing Greece with equipment through the Excess Defense Articles program, including two C-130H aircraft, three Protector-class ships and 60 Bradley armored fighting vehicles.

“Greece has provided substantial military assistance to Ukraine, including Soviet-era BMP infantry fighting vehicles, artillery and small arms,” the U.S. State Department told Defense News. “We thank the government of Greece for its generosity and encourage additional donations, in the future.”

The Defense Security Cooperation Agency, which oversees the Excess Defense Articles program, has not updated the public list of transfers since 2020, despite a congressional requirement that it do so. As such, it’s unclear what other countries are receiving U.S. weapons through the program.

The agency told Defense News it expects to update the list within “several weeks” but did not explain why updates stopped in 2020.

Noah Robertson contributed to this report.

At risk are a set of agreements dubbed Compacts of Free Association, or COFA, under which the U.S. provides aid and other services to three island states: Palau, Micronesia and the Marshall Islands. In return, those countries allow America exclusive military access to their territory, which in total is larger than the continental United States when including their surrounding waters.

Last year, after months of negotiation, the three states signed an updated agreement for $7 billion in U.S. support over 20 years. But that funding has not yet passed in Congress. In the meantime two of the three islands’ current pacts have expired and are now tied to the temporary spending bills that have kept the U.S. government open since late last year.

Palau’s agreement lapses at the end of this fiscal year, but the government there is facing budget shortfalls.

“We’re already late in getting this done,” Jedidiah Royal, the Pentagon’s deputy for Indo-Pacific policy, said in an interview with Defense News.

At stake for the Pentagon are three core security concerns.

The first is competition with China. The islands — collectively referred to as the Freely Associated States — sit near the U.S. territories of Guam and the Northern Mariana Islands and American partners such as Papau New Guinea and Australia. Defense officials consider it indispensable territory.

“They’ve been able to rely on that assumption of presence and access for all of their planning,” said Kathryn Paik, who until last year led the National Security Council’s portfolio for the region. “Every contingency you can imagine in the Pacific — Korea, Taiwan — everything depends on [those] assumptions of defense access.”

Right now, the U.S. has exclusive access to the three islands’ territory, meaning American ships can enter their waters and American planes can fly through their airspace. At the same time, America can also deny the same access to U.S. adversaries, in particular China.

That is crucial to maintaining deterrence in an increasingly competitive region, Siddharth Mohandas, then-deputy assistant secretary of defense for East Asia, said in testimony before Congress last year.

Another security concern involves the United States’ existing defense sites on the islands. The Marshall Islands are home to the Ronald Reagan Ballistic Missile Defense Test Site, and the U.S. is building a radar installation on Palau.

Royal said his office hasn’t studied how much it would cost to relocate these assets and therefore decline to attach a dollar figure to it. But he said that endeavor wouldn’t be cheap, and outside experts have estimated it could cost hundreds of billions of dollars.

Lastly, officials across the government are concerned about credibility. The hallmark of the Biden administration’s approach to the Indo-Pacific has been its work with allies and partners. In the last few years, the government has helped widen and deepen security ties with countries across the region, including the neighborhood affected by COFA.

In recent years, China has bolstered its influence with nearby island nations. The Solomon Islands flipped its diplomatic recognition from Taiwan to China in 2019, a win for Beijing, which considers Taiwan a renegade province and has threatened to take it back by force. Days after Taiwan’s presidential elections this year, in which a pro-independence candidate won, the island nation of Nauru also restored diplomatic relations with Beijing over Taipei.

The Freely Associated States have reminded the U.S. of their value, Royal said, but “they’re also telling us that we’re not the only game in town.”

Paik also emphasized concerns from the regional partners.

“We have been fighting against this skepticism that we’re hearing from leaders across the region: ‘Are you really here to stay this time?’” she said.

‘Working around the clock’

A bipartisan group of almost 50 House members this week wrote to the chamber’s speaker urging him to pass the agreements. And Royal’s office has increased its tempo of briefings before Congress on the issue in the last two months. He said his team hasn’t received pushback.

But the hitch involves funding trade-offs. House leadership has demanded $2.3 billion of the agreements be met with other spending cuts — against the administration’s position that the pacts shouldn’t require offsets.

COFA funding was included in the first draft of the fiscal 2024 National Defense Authorization Act, but didn’t make the final text when negotiators couldn’t agree to offsets in time. Neither did it make the most recent text of the $95 billion security supplemental that passed the Senate in February.

A congressional aide familiar with the discussions said the issue has the attention of leadership, and that representatives are asking to attach funding to the supplemental. But that bill itself has stalled.

“We’re just working around the clock to find the offset and then put it in the legislative vehicle that’s readily available,” the aide said.

In the meantime, U.S. access to the territories is up to the discretion of the countries party to COFA. Those nations can revoke that access at their discretion, and the longer it takes to fund the pacts in Congress, the more pressure their leaders will face to hedge against American dysfunction, said Arnold Palacios, governor of the Northern Mariana Islands.

“Patience is a virtue, but it also has its limits,” he told Defense News.

“We have to cannibalize some things in order to be able to keep other things alive,” Craig Martell, the Defense Department’s chief digital and AI officer, or CDAO, told reporters Feb. 22.

Congress has yet to pass a full defense budget for fiscal year 2024, which began Oct. 1, even as the Biden administration readies its fiscal 2025 spending blueprint. At least 40 continuing resolutions, or stopgap funding bills, have been enacted since 2010.

That record of funding uncertainty hurts talent and training initiatives as well as what’s known as the AI scaffolding, or the virtual infrastructure that makes models usable, accurate and relevant to the military, Martell said.

“That kind of behavior, of being agile, sitting next to the operator, building and growing and building and changing and building and iterating, is very difficult, if not impossible, to do under the conditions of a continuing resolution,” he said on the sidelines of the Defense Data and AI Symposium in Washington.

When does the continuing resolution expire, and how does it work?

The Defense Department sought $1.8 billion for AI in fiscal 2024. The department is juggling hundreds of AI-related projects, including some associated with major weapons systems such as the Joint Light Tactical Vehicle and the MQ-9 Unmanned Aerial Vehicle, the Government Accountability Office reported.

While the CDAO is relatively new — having been announced in 2021 and hitting its first full strides in 2022 — making the case for its existence and expenditures isn’t difficult, according to Martell, who previously worked on machine learning at Lyft and served as an associate chairman of computer science at the Naval Postgraduate School.

The public and private sectors are increasingly interested in AI and other pattern-recognition capabilities, and digital competition with China is steaming ahead. The Defense Department’s connectivity campaign known as Combined Joint All-Domain Command and Control hinges on data-and-analytics advancements made by the CDAO, as well.

Martell said he considers the budget struggles a normal part of the give and take in Washington.

“I don’t take the continuing resolution to be a slight against us,” he said.

The Defense Department this week announced it secured a so-called minimum viable capability for CJADC2, tying together some existing software applications and data feeds to connect troops across land, air, sea, space and cyber.

While officials did not disclose exactly where it is in use, they did say it’s now being applied by combatant commands.

Such real-world application “should show that the department is making paradigm-shifting changes at a scale and at a speed that is rivaling any potential competitor that we could have. This is just one example,” Air Force Col. Matthew Strohmeyer told reporters on the sidelines of the Defense Data and AI Symposium in Washington.

Strohmeyer leads the Global Information Dominance experiments, or GIDEs, that help shape CJADC2. The exercises were rebooted by the Chief Digital and Artificial Intelligence Office last year. The next GIDE is scheduled to begin in a few days.

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“We went from the deputy secretary telling us six months prior, ‘I want a minimum viable capability for CJADC2,’ and the department was able to deliver on that at scale, across combatant commands and the joint staff,” Strohmeyer said. “It’s showing that we are making very tangible, rapid progress with actual capabilities in the hands of warfighters.”

The Defense Department wants to digitally link Army, Air Force and Navy units to improve information-sharing and response to foreign aggression.

By more quickly receiving, parsing and disseminating information, defense officials hope to outwit and outshoot tech-savvy adversaries of the future. Lawmakers have pushed the Defense Department to prioritize long-range networking and intelligence-relaying needs in the Indo-Pacific, where the U.S. may clash with China.

“When you begin to aggregate the data, AI aside, you can start to discover the forest from the trees a little bit in things that competitors might be doing,” Strohmeyer said. “As we bring those data sets together, we’re starting to really gain insights that we didn’t know that were there originally, without having to create any new programs, without having to invest in new things.”

The Defense Department’s multibillion-dollar connectivity campaign comes as China pursues its own version — or a countermeasure — known as Multi-Domain Precision Warfare.

The MDPW construct relies on interlinked command and control, communications, computers, intelligence, surveillance and reconnaissance to quickly coordinate firepower and expose foreign weaknesses, according to the China Military Power Report, which the Defense Department delivers to Congress. Officials in Beijing have long pursued an information-fluent force capable of dominating networks and bombarding targets from a sprawl of locations with a cocktail of weaponry.

Craig Martell, the Defense Department’s chief digital and artificial intelligence officer, told reporters Thursday he took the job in part to solve complicated problems like CJADC2 and provide U.S. troops the tools they need to succeed. Martell was named CDAO in April 2022. He previously worked on machine learning at Lyft and served as an associate chairman of computer science at the Naval Postgraduate School.

“What is command and control in Napolean’s day? You’re a general standing on a hill, watching your troops, and you send messages to your generals. That was command and control,” he told reporters. “Now, command and control is highly digital with fast-flowing data, so commanders can make strategic decisions and get the results down to folks who can act on the decisions quickly.”

“That’s what we want to create,” he added. “We want to be able to help.”

The Defense Department’s fiscal 2024 budget blueprint allocated $1.4 billion for CJADC2. Budget documents described the endeavor as transformative to the way fights are fought, especially alongside other militaries.

Thwarting China’s increasingly global ambitions requires collaborating with other nations, including Australia, Japan and South Korea. A key component of CJADC2 is the mission-partner environment, where data from a range of foreign sources can be collected, secured and distributed.

“We are not going to be successful without our partners and allies,” Martell said. “Anything we’ve been building, we’ve been thinking about how our partners and allies will play with us, will fight with us, will train with us, from the beginning.”

“The minimum viable capability for CJADC2 is real and ready now,” she said Feb. 21 at the Defense Data and AI Symposium in Washington. “It’s low latency and extremely reliable.”

There is still more work to do, but recent progress on implementing advanced communication and information-sharing processes has made the concept a reality, at least in a limited capacity, Hicks said.

“For security reasons, I can’t say where or what that capability is for, but I can tell you it was no easy task,” she said.

The achievement is an outgrowth of the Global Information Dominance experiments, or GIDEs, led by the Defense Department’s Chief Digital and Artificial Intelligence Office, or CDAO. The office revived the GIDE series in 2023 with the intent of advancing coordination across the military, as well as to get a better understanding of AI’s role. Northern Command and North American Aerospace Defense Command previously led them.

Scale AI to evaluate large language models for Pentagon

“CDAO and its partners have used a series of Global Information Dominance experiments to set a blisteringly fast pace for this work,” Hicks said. “Every 90 days we’re iterating on capability development and delivery, and we’ll be keeping it up in 2024.”

Future GIDEs will tie into the Army’s Project Convergence as well as exercises with Indo-Pacific Command, whose remit includes China and North Korea. U.S. lawmakers have pushed the Defense Department to prioritize INDOPACOM’s long-range networking and intelligence-relaying needs.

Defense officials want to digitally tether forces across land, air, sea, space and cyber in order to outwit and outmaneuver tech-savvy adversaries of the future. The quicker battlefield information can be collected, analyzed and disseminated, the quicker and more precisely targets can be taken down. Folding in AI and other pattern-recognizing programs to tackle tides of data will be critical.

“That’s the beauty of what software can do for hard power,” Hicks said. “Delivery doesn’t take years or decades. Our investments in data, AI and compute are empowering warfighters today.”

The Defense Department’s fiscal 2024 budget blueprint allocated $1.4 billion for CJADC2. Budget documents described the connectivity campaign as transformative to the way the military operates, especially alongside foreign partners.

The U.S. Department of Defense selected Scale AI to help it test and evaluate generative artificial intelligence for military applications.

The California-based company announced the work with the Chief Digital and AI Office on Feb. 20, the same day the CDAO was scheduled to kick off its conference in Washington, D.C., featuring discussions on the topic.

Generative AI is capable of generating text, images or other data outputs using algorithmic models in response to user prompts. Large language models are a type of generative AI that uses statistical relationships among text documents or other inputs, either by itself or through a supervised training process, to pump out essays, computer code, human-like conversation and more. Scale AI will produce benchmarks for such systems under the contract.

The Defense Department has expressed increasing interest in generative AI, but its uses remain debated. While a smart assistant or chatbot could efficiently find files, answer frequently asked questions or dig up contact information, such tools can also fuel disinformation campaigns, spoofing attempts and cyberattacks. The CDAO in August launched Task Force Lima to study and guide generative AI for national security purposes.

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“Testing and evaluating generative AI will help the DOD understand the strengths and limitations of the technology, so it can be deployed responsibly,” Alexandr Wang, the founder and chief executive of Scale, said in a statement. “Scale is honored to partner with the DOD on this framework.”

The Tuesday announcement did not include a dollar value for the work.

Wang in July told Congress outdated data-retention and -management policies were hamstringing the Defense Department. What is needed, he said at the time, is “doubling down on some of these fast procurement methods and ensuring that we continue to innovate.”

“AI systems are only as good as the data that they are trained on,” he added.

Scale in 2022 won a nearly $250 million contract to provide federal agencies access to its technologies. The blanket purchasing agreement was issued by the Joint AI Center, which was subsumed by the CDAO.

The topic was consolidation. The Cold War was over, which meant America would spend less on defense. That also meant less money for the companies in the room. Officials flashed a black-and-white graph onto the wall, showing a plunge in how many contractors the Pentagon could afford. Companies would likely need to merge if they wanted to survive.

Norm Augustine — then-chief executive of Martin Marietta, which itself merged in 1995 to become Lockheed Martin — had been there, sitting beside the defense secretary. A day later, he returned to the Pentagon and grabbed a copy of that chart, expecting it to be a historic document. He still has it today.

Within a decade, the number of large prime contractors plummeted from 51 to five, creating the modern defense industry. Lockheed merged with Martin. Boeing merged with McDonnell Douglas.

“Sitting there at the Last Supper, I felt like I was sitting in a historical pivot point,” Augustine told Defense News. “They did the best [with] a bad hand, and we’re now paying the price for the bad hand.”

That price is a defense sector that can’t move as quickly as the Pentagon wants it to. America is now supplying materiel for the wars in Ukraine and Israel, which started a year and a half apart. The high demand has strained an industry that often struggled to meet needs long before Russia’s full-scale invasion of Ukraine in February 2022.

And these wars aren’t even the Defense Department’s top priority; that’s China, whose massive military buildup over the last 20 years is the pace America’s leaders say they must match. Nowhere is this clearer than in the Pentagon’s new defense-industrial strategy, which says China’s industrial might in many areas “vastly exceeds” that of the U.S. and its allies.

In response, the plan calls for “generational” investment in the industrial base. To do so, the Pentagon is now showing a new set of graphs.

Bill LaPlante, the department’s top weapons buyer, has a wall in his office covered with images plotting how long it would take to build more missiles and other munitions. His deputies are sharing these with company after company, he said — though the Pentagon isn’t making them public.

Call it a tale of two charts: In 30 years, the Pentagon went from a defense industry it considered too large to sustain, to one now too small to surge. To understand that path, Defense News spoke with analysts and industry executives as well as top industrial base policy officials dating back to the Clinton administration. They likened the sector to something of a spring-loaded door — where capacity slammed shut due to smaller budgets, changing preferences and a thinning workforce.

That door is now creaking open again as America retools its defense industry, workforce and suppliers to compete with an advanced adversary.

“It’s dusting off a lot of skills that we’ve had in this country that we haven’t used in a while,” LaPlante told reporters in December at the Reagan National Defense Forum.

Industrial base 101

Experts on America’s defense industry tend to speak about it like an intro economics course. They often note the sector doesn’t move like other markets.

Defense companies build what governments want, but rarely any more or anything different. The Pentagon’s orders, hence, have an unusual amount of sway over the shape of the companies fulfilling them.

“The defense industry is hypersensitive to and responsive to its customers,” said Steve Grundman, a senior fellow at the Atlantic Council think tank.

Grundman worked in the Pentagon in the 1990s, in the wake of the peace dividend. Military spending had surged under the Reagan administration as the U.S. competed with the Soviet Union. But when the USSR dissolved in 1991, ending the Cold War, America had no opponents left to outcompete. Defense spending fell each fiscal year from 1985 to 1998, according to the Center for Strategic and Budgetary Assessments think tank.

Specifically, the Pentagon’s spending on procurement, research, development and construction dropped 44% during that time period, CSBA found.

America needed a defense industry built for peacetime. So arrived the Last Supper, a name Augustine himself gave the 1993 dinner. Even at the time, he said, it appeared to be sound policy. Defense spending was bound to fall, leaving the Pentagon with two choices: a sprawling industry versus a smaller, more efficient one.

Defense officials encouraged the latter. Alongside the plummet of prime contractors, the number of mid-tier and small suppliers also cratered as companies merged in order to lower costs.

Eventually the government said enough was enough. In the late 1990s, it blocked Lockheed Martin’s plan to buy Northrop Grumman. The era of major consolidation was over.

Its effects were twofold: less competition and less ability to surge. The first, in many cases, has meant the Pentagon’s orders take longer, cost more and are vulnerable to brittle supply chains. The second — caused both by consolidation and more efficient manufacturing techniques — makes it harder to respond to sudden conflicts.

Heading into the 2000s, leaders in large part began to favor weapons that were more advanced but would be fewer in number. Defense Secretary Donald Rumsfeld labeled it a “transformation” that would vault the Pentagon’s arsenal a whole generation ahead.

Some of these advanced weapons — such as the Army’s Future Combat System and the Navy’s Littoral Combat Ship — did not work out as intended. And the shift toward fewer, more capable systems further encouraged companies to consolidate.

In 1998, five companies built surface ships and two made tracked combat vehicles. By 2020, those numbers had fallen to two and one respectively.

“As dumb as it sounds, given how much we spend on defense, oftentimes the volume for any single supplier isn’t enough,” said Dave Bassett, a retired Army lieutenant general, who until December ran the Defense Contract Management Agency.

‘A wake-up call’

The peace dividend did not survive America’s wars in Iraq and Afghanistan.

The 9/11 attacks followed by the two conflicts swelled the Defense Department’s budget. When adjusted for inflation and including supplemental funding, Pentagon spending rose an average of 7% from fiscal 1999 to fiscal 2008, according to CSBA.

This spending went toward a new set of threats.

As an example, Bassett and other experts interviewed by Defense News singled out a class of heavily armored vehicles developed for the wars. The mine-resistant, ambush-protected vehicle program was Defense Secretary Bob Gates’ top priority. With heavy investment, the Pentagon fielded more than 13,000 MRAP vehicles in three years.

The program has since become a talisman for some who argue the defense industry can move nimbly if given the proper resources. But it’s also a reminder of where those resources went for more than 15 years. From 2001 onward, the Pentagon needed weapons for counterinsurgencies.

Those are far from what Ukraine needs to defend itself against Russia — an industrial-age war defined by the use of artillery and small drones. Even further are the needs of defending Taiwan, an island nation threatened by a leading manufacturing powerhouse.

“If what you’re facing is an Iraqi threat, you’re probably not going to have the same capacity as when you face a Russian and the Chinese threat,” said Bill Lynn, deputy defense secretary during the Obama administration and now chief executive of Leonardo DRS.

And the change in capacity had become clear to defense officials.

Brett Lambert, who ran industrial base policy for the Pentagon while Lynn was deputy secretary, remembers a tornado in 2011 that struck Joplin, Missouri — nearly hitting a major battery supplier.

“We realized that even though the plant itself was not hit, we didn’t have a backup,” Lambert said. “That was a wake-up call to me.”

Another warning came in the form of a four-year study of major weapons programs Lambert helped lead. He found, in large part, that prime contractors didn’t understand their own supply chains.

But while the alarm went off, no one woke up, said Robert Lusardi, a former Pentagon industry official. The study’s data, he noted, largely faded into the ether.

“Nobody used it,” he said.

‘There’s never just one problem’

Eric Chewning was vacationing with his family at the Outer Banks in summer 2017.

Sitting on the North Carolina beach with his kids, Chewning — then a partner at the consulting firm McKinsey and Co. — scrolled through his phone and saw a news release about an executive order. President Donald Trump was instructing the Pentagon’s first top-down review of its defense-industrial base since the Eisenhower administration.

“I say to myself: ‘Who are they going to get to do that?’ ” Chewning told Defense News in an interview.

Later that day, he was walking back from the beach when he got a call from the Pentagon asking if he would interview for the top industrial base policy role. In October, he took the job, which meant he would be the one running the study.

“The mindset was: How do we holistically now transition ourselves from the post-9/11 wars, where there really wasn’t ever a question around our ability to generate enough material capability, to one focused on competition with an economic peer?” Chewning said.

What he found is that doing so wouldn’t be easy — in large part because of what was happening with the American workforce. By the time the defense industry consolidated in the 1990s, the U.S. was decades into a deep manufacturing slide.

From the late 1970s to 2017, the country lost 7.1 million manufacturing jobs, or 36% of the sector’s workforce, according to the study Chewning led. Such declines serve as a challenge to any attempt to quickly bulk up America’s defense industry. Even with more advanced factories that now heavily rely on robotics, weapons still need people who know how to build them.

This is part of why capacity is so difficult to add once it’s gone, said Bassett, the retired Army general. It takes years to find and train skilled workers, as companies across the country have seen in the recently tight labor market.

While leading the Defense Contract Management Agency, Bassett studied business traits that would help predict manufacturing problems. A significant one he found was the share of blue-collar employees who had been on the job for less than a year; once it reached a certain threshold, he said, quality issues were almost guaranteed.

While the 2018 study led to some reforms, it did not reverse the trend in manufacturing, which only got worse as older workers retired en masse during the COVID-19 pandemic. Like many reports in Washington, it pointed to major issues that existed alongside other difficulties, all competing for time and money.

“There’s never just one problem,” said Chewning, now a vice president at the shipbuilder HII. “The immediate problems get the most attention.”

By 2022, the problem had become immediate. Russia launched a full-scale invasion of Ukraine, and Washington continued sending weapons to aid Kyiv.

The U.S. has given Ukraine a staggering amount of security aid — more than $44 billion since February 2022. Despite that sum, one of the lessons for many in the Pentagon has been that industry was unprepared for a crisis.

Arguably, nowhere is this more obvious than in America’s supply of 155mm artillery shells.

The 155mm round — next to small drones – has defined fighting in Ukraine. For self-defense, Kyiv needs 60,000-80,000 shells per month, Michael Kofman, an analyst at the Carnegie Endowment for International Peace, told Defense News.

That rate well surpasses the pace at which Ukraine’s Western allies could resupply them. Even with an extra $1.5 billion from Congress in 2023 to increase production, America was making 28,000-30,000 shells in December, said LaPlante, who is in charge of acquisition and sustainment at the Pentagon.

The Defense Department’s goal is to reach 100,000 rounds per month by the middle of 2025. But that pace likely won’t be possible without more funding from Congress, which has stalled a security spending bill requested by the White House.

But funding hasn’t slowed down production in recent years; from FY16 to FY23, Congress added 7.3%, or $79.3 billion, to the White House’s requested Pentagon procurement fund, according to CSBA. The problem is inconsistent demand, which LaPlante illustrated with another chart last fall.

Starting with the Gulf War 30 years ago, munition orders have gone up and down in a series of peaks and valleys: A crisis breaks out, the Pentagon surges supply, it reaches the number a couple years later, then the crisis wanes and supply falls.

“That’s one of the challenges that we have now — that inability to make adjustments because of the lack of investment that we’ve made to the industrial base historically,” Justin McFarlin, who leads industrial base development for the Pentagon, told Defense News.

Munitions are often at high risk for such whiplash. Eric Fanning noticed this pattern after years of holding senior positions with the Navy, the Air Force and the Army. Much of each service’s spending power was sewed up in large systems, such as aircraft carriers and fighter jets. More inexpensive items ended up tapered to make the budget fit. And because the Pentagon’s demand affects supply, the companies fulfilling those orders trimmed capacity over time.

Now orders are up again — this time for 155mm shells and a bevy of other munitions. For some, Congress has allowed the Pentagon to issue long-term contracts that keep demand stable for years. But for others, companies are left worrying government demand won’t last, according to Fanning, now head of the Aerospace Industries Association.

“That sense of long-term commitment is still not quite there,” he said.

‘First contact with the enemy’

The Pentagon says it’s signaling future commitments in its new industrial base strategy. The document focuses on four areas: creating resilient supply chains, ensuring workforce readiness, creating business-friendly acquisition policies and bolstering the national security marketplace.

“These are not new ideas,” Halimah Najieb-Locke, acting deputy for industrial base policy, told Defense News. “But they haven’t been said with the [needed] authority.”

In a separate briefing with reporters in January, Najieb-Locke previewed the Pentagon’s goals for its defense-industrial base over the next three to five years. One is to speed up long-lead items, such as ball bearings or solid-rocket motors that slow down the production of important weapons. Others include retooling obsolete parts of the supply chain and using more funding from the Defense Production Act, which allows the Pentagon to issue national security-related grants.

“We no longer can afford to ignore [issues in the industrial base] and hope for better,” Najieb-Locke told Defense News. “We have to take decisive action.”

But there are problems outside of the Pentagon’s control.

The first is politics. As of publication, Congress had yet to pass a full defense spending bill — the latest entry in more than a decade of continuing resolutions. Defense remains a largely bipartisan issue, but there is a widening gap within the Republican Party — one reason Congress hasn’t passed additional aid for Ukraine, Israel and Taiwan.

Today’s security environment “demands a substantial, long-term increase in resources for our national defense,” Sen. Roger Wicker, R-Miss., the ranking member of the Senate Armed Services Committee, told Defense News in a statement.

Some of his colleagues in the House are more skeptical. “The American people work diligently to earn every dollar, but it seems the [Defense Department] has become a master of squandering those funds without batting an eye,” Rep. Glenn Grothman, R-Wis., told Defense News in December.

The second external problem is innovation. In decades past, the Pentagon used to be upstream of new technology — think GPS or the internet. It’s since found itself downstream, said Lynn, the former deputy defense secretary, and much of the current advances in artificial intelligence and drones are coming from the commercial sector.

Learning how to better work with these companies is one of the strategy’s goals. Doing so, said Najieb-Locke, will involve updating the Pentagon’s buying policies to better align with the commercial sector — a market that the Pentagon has less influence over.

“Because of that rapid change [in technology], a lot of our assumptions of what will be there in time of need have [proved] to be in some cases overblown,” said Najieb-Locke.

A third challenge is America’s adversaries. The Russia-Ukraine and Israel-Hamas wars are a reminder that competitors ultimately help decide how fast America’s defense industry must work, and when.

Chris Michienzi learned this lesson from her time working on the Pentagon’s industrial base policy. For about eight years she helped steer the department’s approach to industry and saw challenges evolve. When the war in Ukraine began in 2022, she was one of a few officials working on aid to Kyiv.

Many of the problems of the last 30 years were on display. A worker shortage hampered attempts to surge key munitions, she cited as an example.

“The department gets the industrial base that it pays for,” she said.

Michienzi left her post last summer. In January, when Defense News spoke with McFarlin, who leads industrial base development for the Pentagon, the interview took place in Michienzi’s old office — a small, windowless cube.

No one had filled the space, and it was instead turned into a conference room — helpful for McFarlin as he briefed companies on the government’s new strategy.

“The saying I grew up [with] was: No plan survives first contact with the enemy,” McFarlin said. “We can plan, but we also have to be able to pivot and adjust.”

Military operations in Ukraine have cost Russia up to $211 billion and the country has lost $10 billion in canceled or paused arms sales. At least 20 medium to large Russian naval vessels have been sunk in the Black Sea and 315,000 Russian soldiers have either been killed or wounded, according to U.S. Department of Defense data.

These figures, shared by a senior defense official speaking with reporters on the condition of anonymity, are in part an attempt for the Pentagon to show its work on the effect of Ukraine aid. U.S. support for Kyiv helps a democratic partner defend itself, while at the same time degrading America’s second-leading adversary in Russia. The Pentagon’s estimates show how deep those costs have been.

And yet, the official described the current state of the war as precarious for Ukraine, not Russia.

After months of defending the eastern city of Avdiivka, Ukrainian forces there are on the brink of collapse. Taking the city would mark Russia’s largest advance since it seized Bakhmut last year. The flagging front lines are in large part a product of ammunition shortages, which have grown more acute since the Pentagon ran out of money for Ukraine aid late last year, the official said — warning that the problems in Avdiivka may not stop there.

“We see this as something that could be the harbinger of what is to come if we do not get this supplemental funding,” the official said, referencing $60 billion in further aid the White House requested last year.

A version of that deal passed the Senate on bipartisan lines this week but has little chance of success in the House, where Republican Speaker Mike Johnson has said he won’t put it up for a vote.

In the interim, the official said, Ukrainian forces are running out of ammunition and air defense interceptors, which help defend the country’s critical infrastructure from Russian attacks.

The U.S. is not the only country sending military support to Ukraine. This week marked the 19th meeting of the Ukraine Defense Contact Group, a set of countries that have helped bolster Kyiv’s self defense over the last two years. Canada pledged $60 million to support Ukraine’s air force and Germany announced a $1.2 billion air defense and artillery package.

Still, it was notably the second straight meeting in which the U.S. provided no aid of its own, a streak that will continue if the supplemental does not pass in Congress.

“Our military is always working to be as prepared as possible, but we do absolutely need this supplemental funding,” the official said. “There is no substitute for it.”

But before the U.S. issues that exemption, it wants Australia to adopt export control laws similar to its own. And several Australian defense companies are unhappy about legislation pending in Australia’s parliament that would replicate a U.S.-style export control regime.

They say importing the stringent U.S. export control laws could hinder their ability to effectively collaborate and do business with non-AUKUS countries.

Australia and Britain have long sought a carveout within Washington’s International Traffic in Arms Regulation, or ITAR, export control regime. Defense companies in all three countries have argued ITAR’s rigorous restrictions on sensitive defense exports stymies a key AUKUS goal of jointly developing disruptive technology such as quantum computing, artificial intelligence and hypersonic weapons.

The U.S. Congress passed legislation in December to give Australia and Britain an ITAR exemption for AUKUS, on the condition that both countries implement similarly tough export control laws. Canada is currently the only country to enjoy a special ITAR exemption.

Before Australia and Britain receive their exemptions, Secretary of State Antony Blinken must certify they have each implemented comparable export control regimes.

Michael Biercuk, the chief executive of Q-CTRL, an Australian firm specializing in quantum technology that has offices in Sydney, Los Angeles and London, said the company is “supportive of the idea of making a control-free zone, if you will, between Australia, the U.S. and the U.K. in support of AUKUS.

However, “we don’t think the right way to do it is to bring in the totality of the system that everybody in the world says doesn’t work,” he added, noting the policy would “fundamentally limit exports outside of that AUKUS bubble, and this is not something that is helpful to the local community of vendors who are heavily reliant on export markets.”

Andreas Schwer, the chief executive of EOS, an Australian company specializing in high-tech remote weapons stations, directed energy and counter-unmanned aircraft systems, told Defense News stricter, more ITAR-like regulations in the country “will make life extremely difficult for us to export into any non-AUKUS country.” He said it can sometimes take six months to a year to get simple upgrades formally approved for NATO allies under ITAR.

“This is something which is hated by most of the western European procurement agencies,” said Schwer. “That’s the reason why they always prefer non-ITAR offers. I expect that the same will happen with Australian products. As soon as we have similar regulations in place, they will also say we don’t want to have Australian ITAR components.”

But proponents of ITAR argue it’s a crucial tool for keeping U.S. technology out of the hands of rivals such as China and Russia. Mike Burgess, director general of the Australian Security Intelligence Organisation, warned last year of an uptick in online espionage attempts aimed at the country’s defense industry since AUKUS was announced in September 2021.

U.S. Under Secretary of State for Arms Control Bonnie Jenkins told lawmakers this week the U.S. must “make sure that we protect our intellectual property.

“We know there’s countries like China who want to steal information,” she added.

Jenkins noted Britain updated its espionage laws in July 2023 as part of the National Security Act and pointed to Australia’s proposed export control overhaul pending a review in parliament.

Biercuk said the Australian proposal was “rushed” and called it “a catastrophically bad piece of legislation.”

Still, NIOA Group chief executive Rob Nioa, noted “really what the U.S. wants to do is protect U.S. [intellectual property. “If it was technology that originated in America, it was always subject to those controls,” Nioa told Defense News. “Our concern will be if that captures Australian uniquely produced intellectual property and prohibits it from going to other places.”

NIOA Group is an Australian munitions company which also owns U.S.-headquartered Barrett Firearms and has a joint venture company with Rheinmetall.

Yet, he added, a comparable Australian export control regime “might streamline” some export approval processes by allowing Canberra to administer them “instead of having to go back to the U.S. for approval.”

“Until we see how it’s implemented, I’m not going to automatically panic,” he said. “People are nervous about it though in Australia because people are nervous about the unknown.”

Capt. Alex Campbell, director of the Defense Innovation Unit’s naval portfolio, said the second tranche of Replicator systems will emphasize the software needed to connect the sensors and drones it wants to field over the next 18 months.

“In tranche two . . . the direction from senior leadership is to also focus on the software that enables all those platforms to function and to exist and to work together and to do things that, frankly, we’ve never seen on the battlefield before,” Campbell said during a Feb. 14 panel at the West naval conference in San Diego.

Those capabilities include connecting multiple platforms to provide kinetic effects in complex threat environments, he said.

“We’re really excited to be tackling both the platform side and the software side and, ideally, finding the route to production for a lot of that work,” Campbell said.

Deputy Defense Secretary Kathleen Hicks unveiled Replicator in August, pledging to field thousands of uncrewed systems to defend Taiwan against aggression from China.

Hicks has since been working with DIU and leaders within the military services to formalize a mechanism for quickly fielding high-need commercial systems in large quantities. The goal is for Replicator to be a repeatable process the Pentagon can use to push a range of capabilities to military users.

DIU Director Doug Beck said during a Feb. 15 House Armed Services Committee hearing the department has chosen the first tranche of systems it will field through Replicator. Along with its initial selections, the Defense Department has sent a reprogramming request to Congress that would allow DoD to shift funding appropriated for other projects into the efforts it wants to field through Replicator.

“That’s the department getting after sorting through how we can best help make these things happen as fast as possible,” Beck said at the hearing.

Officials have refused to publicly discuss the specifics of those capabilities. Aditi Kumar, DIU’s deputy director for strategy, policy and national security partnerships, said the department is working on a plan for how it will share information on the effort going forward.

“We want to be very careful about how we communicate with the broader public, and by proxy our adversary, on what we have selected and what quantity, etc.,” she said during a Feb. 13 DIU Innovation Summit in Mountain View, Calif.

The latest National Security Scorecard from data analytics firm Govini revealed countless China-based firms remain deeply embedded in Defense Department supply chains across 12 critical technologies. Consider as well as that the draft version of the Pentagon’s National Defense Industrial Strategy noted that “today’s [defense-industrial base] would be challenged to provide the required capabilities at the speed and scale necessary for the U.S. military and our allies and partners to engage and prevail in a major conflict.”

This is what happens when just-in-time defense manufacturing meets dependence on Chinese companies, not to mention firms in Taiwan that Beijing could blockade during a crisis on which many, if not all, precision weapons and modern platforms depend.

The recently passed fiscal 2024 National Defense Authorization Act barely affects the timeline for eliminating the Pentagon’s dependence on selected Chinese companies and materials. The narrow scope and lengthy time frames of current government efforts to alleviate our supply chain dependencies send an unspoken message to Beijing: The DoD does not have, nor will it soon have, the supply base required to prosecute a long war against China. The message to Taiwan is that we can’t build the weapons and platforms needed to defend you in a protracted war without access to these at-risk supply chains.

Thankfully, there are solutions that the Pentagon and the administration can take to armor the Achilles’ heel of our defense supply chains.

First, they can focus on resiliency rather than independence, entailing the pursuit of multiple solutions to ensure the DoD has sufficient stocks — or access to the production — of the products, materials and services required for a long conflict. To build resiliency, the Pentagon can focus on increasing the size of its inventories, cultivating new second and near-shore sources, and redesigning munitions and platforms that are especially critical for an Indo-Pacific fight.

Resiliency requires assessing the true extent of China- and Taiwan-based dependencies, and remediating them.

Second, the Pentagon should ask Congress to invert its approach to how it defines, analyzes and addresses Pentagon supply chain vulnerabilities. To date, the government’s efforts have largely focused on inputs, as well as suppliers based in so-called covered countries like China. But if the government inverts its approach from inputs (e.g., rare earths) to outputs (e.g., an F-35 jet), it will address dependencies in a more holistic manner, forcing a review of the full supply chain.

Requiring the defense-industrial base to quickly conduct a bottom-up analysis by critical munition and platform that identifies each node in its supply chains — something it could readily by law do with commercial software — would establish a baseline for modeling different platform and munition inputs under different scenarios. These models would rapidly identify potential and growing risks as well as assist the DoD in proactively addressing them. They would also help avert a scenario where the DoD has to reactively scramble to address the collapse of a critical node far down in its supply chains.

Lastly, like the U.S. had during World War II with the War Production Board, someone or some organization should be in charge of these efforts. The Federal Acquisition Security Council may be the best organization to fill that role, as it would be well placed to roll up our supply chain dependencies, place them against requirements to create demand signals and determine how best to fill them.

These actions could be included by the Pentagon in its budget for the coming fiscal year — or given their urgency, a single, focused bill, an executive order, or a future emergency supplemental.

No one knows if or when tensions with China could spiral into armed conflict. But there’s no doubt that the world is becoming more dangerous. The U.S. must send a message to Beijing that we are prepared to prosecute a long war if needed. And the U.S. must also send a message to Taiwan that it will be able to support the island in a time of need. Without ending China’s chokehold on our defense supply chains, we will be hard-pressed to send either.

Retired U.S. Army Maj. Gen. John G. Ferrari is a senior nonresident fellow at the American Enterprise Institute think tank. Ferrari previously served as a director of program analysis and evaluation for the service. Mark Rosenblatt runs Rationalwave Capital Partners, which invests in public and private technology companies.