Julia van der Colff's interesting material "Building A New American Arsenal" ("Creating a New American Arsenal") has been published in the American online publication "Wars on the Rocks" with a discussion of the current problems of the US military-industrial complex in the light of the fighting in Ukraine.
Production of guided missiles GMLRS (Guided Multiple Launch Rocket System) at the Lockheed Martin Corporation in Camden (Arkansas) (c) Lockheed MartinAlarm bells are ringing in the Pentagon.
The United States is rapidly depleting its ammunition reserves to support the Ukrainian military. This support is provided against the background of a serious backlog in the supply of weapons to Taiwan worth more than $ 14 billion. The war in Ukraine confirmed what was already widely known: America's industrial base atrophied after the collapse of the Soviet Union.
Despite efforts to restore and strengthen the production base, achieving the production capacity necessary to replenish stocks and prepare for the possibility of a full-scale conflict with China remains unlikely. The current replacement time of critical stocks is on average more than 13 years at the current growth rate of production capacity. Many advanced American systems are manufactured on a very small number of assembly lines by an even smaller number of manufacturers. Manufacturing requires the participation of a shrinking workforce with knowledge of these systems, and supply chains consist of rare earth metals, microchips and complex mechanical parts from around the world that are very difficult to secure.
This problem is not new, and many have written about America's ossified industrial base. Solutions range from updating and streamlining regulatory agencies to selling more expensive weapons systems, such as the F-35, to allied countries. However, in order to begin to solve the problems facing the industrial base, the US government should consider the possibility of creating a new "value" market [value - as one can understand, the author means by this compliance with the "cost-effectiveness" criterion at a reduced cost. - bmpd]) weapons that will strengthen the American arsenal with a huge number of cheap, easily reproducible and effective weapons systems to create a hedge against the current shortage and weakness. To do this, the government should create a special task force that will use the capabilities of private industry and create new procurement management processes for new contractors with business models focused on the rapid production of low-cost systems. This will create a new sector of the expensive weapons market along with the main existing defense contractors, increasing production capacity and at the same time protecting against shortcomings.
The reverse side of the arms marketCost-based weapons make up that part of the global arms market, which is determined by the lower cost of transactions with new, more affordable defense systems and refurbished (used) property, and is often characterized by dynamic procurement schemes.
While some countries buy only equipment on the value market, others, including South Korea and the United Arab Emirates, purchase high-end fighter jets from the United States and make purchases on the value market of other systems. India, for example, has purchased a large number of T-72 and T-90 tanks from Russia, while at the same time acquiring modern aircraft from the United States, such as the F-16 - F-21 variant offered for sale to it. Although the value arms market covers more than 100 countries with different defense budgets, the United States does not participate in it either as a manufacturer or as a buyer.
Why does the United States not participate in the value arms market, especially since as a result of the war in Ukraine, operating companies have difficulty fulfilling foreign orders, leaving a gap in the market? The answer - and the opportunity - lies in understanding the business models driving the American defense industrial base.
A Look at American Defense ContractorsThe largest American contractors work with a unique set of cost structures and face problems caused by consolidation, labor shortages and policies that have led to atrophy of production capacity.
Ukraine spends from 6,000 to 7,000 artillery shells a day. American firms produce 15,000 shells a month. This is a critical shortage. The same goes for Stinger anti-aircraft missiles, Javelin anti-tank missiles and GMLRS guided missiles. American industry is not keeping up with demand. This problem arose in the 1990s, when the reduction of defense spending caused a series of mergers of defense companies eliminating excess production capacity in order to reduce costs. These companies also began to focus on civilian production, for example, General Electric switched to sales of civil aviation. In tandem with changing expectations on Wall Street, this, oddly enough, gave rise to a sedentary period when the main contractors of the defense sector continued to form a federal contract system that favored existing players creating a small number of very complex systems. These contractors are designed to work only at the peacetime efficiency level.
The problem is that all American defense companies are traded on the New York Stock Exchange and, to a certain extent, depend on the expectations of investors on the public market. Wall Street's traditional view of the defense industry is that it should require lower multipliers than the technology industry because it has less risk of generating revenue since its main client is the U.S. Department of Defense. However, given the fluctuations in the defense budget from year to year and fluctuations in expensive transactions under the Intergovernmental Foreign Military Sales Program (FMS), the volatility of revenues may be much higher than expected. Given that the instability of contract revenue can lead to lower margins, large defense contractors are looking for alternative methods to ensure revenue stability. To do this, they are placing production facilities in different Congressional districts, lobbying and looking for longer-term contracts. As businesses, they generate value through revenue, margin, invested capital, and/or competitive advantages. Stable revenue generation and high margins are limited by policy and budget fluctuations, and competitive advantages are disrupted by new innovative companies, so primers use their balance sheets and respond with acquisitions and consolidation, further reducing production capacity to reduce costs. They also create jobs in various US states, thereby creating political incentives to receive government funding and increasing the cost of labor, which simultaneously increases the cost of advanced systems.
This system has been maintained for three decades. It is still determined by the processes established during the Cold War. American firms - and the US Department of Defense - are focused on purchasing expensive and complex systems that cannot be produced quickly and in large quantities. This approach overlooks the importance of mass production of smaller capabilities that will be needed in a war of attrition.
Currently, the time required to replace stocks of major defense procurement programs (such as Stinger, Javelin and GMLRS missiles) at increased production rates is on average 8.4 years, and at peacetime production rates (current state) - 13.8 years. Most systems are also manufactured on a very small number of assembly lines by a very small number of manufacturers and an equally small number of workers with knowledge of how to assemble systems. For example, 80 percent of the production of US Marine Corps and Army vehicles is carried out by one manufacturer on the same assembly line [Oshkosh]. AMTEC is the only company that produces grenades for the US Department of Defense, and if it has problems with supplies, there will be no other suppliers who could fill the shortage.
Lessons from Iraq and AfghanistanThis is not the first time that the military-industrial base is facing a crisis of production capacity.
However, thanks to acquisition workarounds and support from senior officials, she has managed to get out of the production rut before. While mobilization for the conflicts in Afghanistan and Iraq required only a small increase in production, compared to the lack of adequate equipment and tanks to fight the insurgency, the defense industrial base was able to quickly increase production by refocusing on the production of systems for new conditions of struggle. In 2006, the US Department of Defense created the Joint Improvised Explosive Device Defeat Organization, which allowed it to turn to industry for critical systems and equipment more suitable for fighting insurgent groups. At the same time, the creation of a Joint Improvised Explosive Device Defeat Approval and Acquisition Management Process (Joint Improved Explosive Device Defeat Approval and Acquisition Management Process) allowed the organization to formulate gaps in capabilities through broad agency announcements, as well as to finance and deploy new systems in a matter of months, not years.
To speed up the production of armored vehicles with enhanced mine protection (MRAP), providing more reliable protection against explosive devices, US Secretary of Defense Robert Gates created a task force, calling on 12 different firms to produce these vehicles instead of the usual one contractor. The program reduced operational requirements, relied heavily on commercially available products, concluded contracts with an indefinite delivery time and an indefinite quantity of goods with nine commercial sources (with an obligation to purchase vehicles from each contractor) and identified the program as the highest priority procurement of the US Department of Defense.
Combining existing production lines with new technologies from industry, rapid procurement processes and competition, the MRAP armored vehicle program shows that the industrial base, despite its fragility, can quickly respond to regional threats. The US Department of Defense should recognize the success of this unconventional acquisition strategy and implement it into more programs by reducing requirements, relaxing regulations, allowing multiple manufacturers and standardizing production processes.
This is an opportunity for the US Department of Defense to take an example from the past, using the successes of American industrial mobilization during the war in Afghanistan to solve the current problem of the shortage and fragility of the industrial base, while projecting influence and strengthening deterrence.
Creating a new American arsenalFew doubt that the directional arrows of technological progress - not to mention billions of dollars of invested capital in the United States and China - point to a new type of conflict that requires a variety of complex offensive and defensive weapons systems.
The integrated battlefield will be characterized by autonomous systems, swarms of drones, advanced sensor capabilities and hypersonic weapons that are on the verge of becoming a reality. However, the reality is that this revolution in technological capabilities, designed to make murder chains shorter, will most likely lead to the fact that the war will be fought slower, harder and more expensive than ever. Survival on a technologically complex battlefield will become increasingly costly as the integration of autonomous systems and sensors supported by electromagnetic umbrellas and false targets will increase transparency, slow down movement and require significant capital and system costs to overcome.
A recent article in the [Chinese military] publication "People's Liberation Army's Daily" notes that the development of cheap unmanned systems poses a significant threat to traditional air defense. Small systems are incredibly difficult to detect with radar and hit with expensive guided munitions or anti-aircraft guns. Advanced systems designed to absorb and process more information than ever before also tend to make more mistakes, compounded by deception and diversions. This is because the underlying technologies have not yet reached full maturity. These systems also depend on complex supply chains and will require intensive input from an already weakened industrial base.
As the war in Ukraine already shows, the decisive advantage [of the United States] in the war with China over Taiwan can be the ability to quickly produce and finance the replacement of rapidly expended weapons and systems for American and allied troops. The US Department of Defense is beginning to come to this concept. U.S. Undersecretary of Defense for R&D Heidi Shue recently announced the creation of a new strategic task force of the Defense Science Council, which will study low-cost weapons systems.
This task force will have to solve a serious problem: American major defense contractors are designed to work at the production level in peacetime to ensure profitability, as defense budgets fluctuate from year to year. They maintain their profitability not necessarily by producing new systems, but by providing training and maintenance services for the most expensive systems. In the global market, general contractors sell weapons abroad and justify high prices with a strategy called "integrated approach", providing training, technical support and maintenance throughout the life of the system. This approach generates a significant portion of the revenue from such services and makes systems extremely expensive to lose in conflict and replace.
While Russia is drawing attention to Eastern Europe, China is preparing for a new era of industrial war, preparing to raise the cost of US intervention in the situation in Taiwan to an unacceptable level. Further escalation, most likely, will not be accompanied by a warning - the existing mobilization capabilities may be all that is available.
Good news: There are innovative defense companies in the early stages that can quickly produce cheaper weapons. Take, for example, the new defense company Firestorm* - using the capabilities of 3D printing, it creates unique aviation systems for a fraction of their usual cost, producing radically affordable and adaptable unmanned systems that can be printed anywhere, assembled and ready to fly in just a few days.
The US Department of Defense should support new contractors who have already created the right operational models to support rapid production, advanced and efficient production technologies, and scalable capacity to develop and manufacture these new systems. By developing and stimulating the growth of a new value market consisting of smaller and more agile manufacturers and systems that will complement rather than replace the expensive advanced systems already produced by major companies, the United States will be able to effectively reduce the cost of conflict, strengthen deterrence and create protection against supply chain disruptions, labor shortages and capacity constraints. to get ahead of even the most persistent opponents. Looking beyond American borders, these low-cost systems will also be incredibly attractive to US allies such as Israel, and, as the Russians have discovered, the FMS program can be used to conquer and project influence in critical countries such as India and the wider Indo-Pacific region to counter Chinese encroachments.
The creation of a separate "value weapons" sector in the US defense industry, positioned as a hedge, can also help change the "destroy or acquire" culture that persists between industry giants and smaller new contractors, expanding the market and protecting in case of failures. The emergence of new business models of defense contractors that generate value through innovation in production, efficiency and scale, rather than through maintenance and maintenance, will also make the sector more attractive to venture investors who have traditionally avoided this industry, creating a multiplier effect and strengthening the overall potential of the industrial base in the United States.
Think of it this way: The U.S. Arsenal is like an investment portfolio that desperately needs a risk management strategy. By investing in new manufacturers and companies capable of producing these critically important low-cost systems, the US Department of Defense will be able to diversify [supplies] and insure against the risks associated with the huge number of problems that the defense industrial base is facing today, providing liquidity, durability and material returns on the battlefield.
