Since the end of the Cold War, the defense sector has consolidated substantially, transitioning from 51 to 5 aerospace and defense prime contractors. Additionally, there has been an associated net loss of 17,000 Defense sector companies over the last 5 years and a 40% reduction in small business participating in the DIB over the last 10 years.
With the end of the Cold War, America allowed its defense industrial base to atrophy as the likelihood of a resurgent Russia or the rise of a near-peer competitor like China seemed remote. The resulting “peace dividend” saw American priorities shift to other areas while our adversaries expanded their military capabilities and capacity at a rate few thought possible. The consequences have become painfully clear in recent years. China’s shipbuilding capacity far outpaces the United States threatening our maritime interests, while our ability to produce munitions and other military aid needed by allies like Ukraine has slowed dramatically revealing to the world America’s industrial vulnerabilities. Revitalizing our nation’s defense industrial base will require a generational change in thinking, funding, prioritization, and planning. We applaud the recent actions taken by Congress to address this issue, but the severity of the problem will necessitate a whole-of-government response. Learn more here.
The Department of Defense released a first of its kind National Defense Industrial Strategy (NDIS) in January of 2024. The Strategy emphasized four key areas of focus: resilient supply chains, workforce readiness, flexible acquisition, and economic deterrence. The NDIS calls for a fundamental change in the culture of those responsible for setting requirements and for acquiring platforms and systems to meet those requirements. It states clearly that we need to orient acquisition policy for aggressive expansion of production capacity. Learn more here.
“Typical peacetime acquisition reform tends to place more emphasis on greater efficiency, cost effectiveness, transparency, and accountability. Today’s threat environment, however, necessitates acquisition reform that includes efforts to revitalize the defense industrial base, and potentially, rapid expansion to prepare for pacing security challenges. This will require substantial changes to existing acquisition mechanisms.
Correspondingly, there will need to be a change of acquisition mindset that includes increased flexibility and risk tolerances and embracing “fail fast” and similar concepts. Risk aversion must be replaced by aggressive, learning mindsets in both developing and fielding systems underpinned by strong commitments of accountability and responsibility.
Crisis period acquisition policy reform tends to favor better-resourced defense companies. As such, DoD will work to stimulate industry diversification through focused policy directives to help small businesses navigate the complex defense acquisition process.”
-National Defense Industrial Strategy
In addition to the NDIS, the Secretary of the Navy has stressed maritime statecraft and the need for a generational change in American shipbuilding. In his Department of the Navy Three Year Review, submitted in August of 2024, the Secretary of the Navy highlights three fundamental areas of improvement for effective maritime statecraft: transforming naval shipbuilding, seapower through commercial shipbuilding, and developing the shipbuilding workforce. Many of the findings and recommendations presented in this report relate to the Secretary’s 45 Day Shipbuilding Review which candidly addressed the delays in several of the Navy’s highest priority shipbuilding projects. Learn more here.
In addition to funds provided in the FY2024 NDAA and the FY24 Defense Supplemental Appropriations, the Senate version of the FY2025 NDAA attempted to add $25B to the Presidential Budget submission including substantial investments in the shipbuilding industrial base and the Senate Report mentions the term “Industrial Base” 177 times and includes many recommendations proposed in the Commission on the National Defense Strategy’s report. It also calls out for dozens of reports that will flush out the investments into the DIB needed to accelerate the attainment of the four NDIS priorities. However, when the FY25 NDAA was passed, the additional funding was removed in order to remain within the previously agreed upon budget caps. The Act still mentions industrial base 83 times but there was no specific language addressing the shipbuilding industrial base. There is however a section that specifically addresses maritime workforce promotion and recruitment which attempts to address shortages in the maritime labor workforces, including shipbuilding.
“The recommendations throughout this report will require increased resources and the political will to engage internationally that requires the support of a well-informed public. The American people will need to pay for the increases in federal outlays to build the force needed. The American public will have to produce the people to serve in the military, the public sector, and the industrial base. While it is incumbent on political leaders—particularly the President—to make the case for the need for a strong and engaged United States, it cannot be done without the public’s support.”
-Commission on the National Defense Strategy
The Navy League of the United States’ Maritime Policy Committee, after exhaustive research into the current deficiencies related to the industrial base, has identified 14 policy prescriptions which could drastically reverse our current dearth of industrial capacity. From Congressional and Executive Branch action, to investment incentives and tax policy, to international industrial alliances and statecraft, these recommendations form the foundation of a new and revitalized American industrial base. Learn more here.
After winning the Cold War, there was an expectation that we would no longer need to retain the military and associated industrial base that won that war. For three decades the “Peace Dividend” savings were reinvested in other priorities. Unfortunately, world events have gone in a different direction, and China spent that time building a first-rate Navy and we are now again facing a peer military and economic competitor in China, as well as a resurgent Russian military threat. Deterring these potential adversaries requires rebuilding military capabilities and capacity and the supporting defense industrial base (DIB). This will be a massive challenge since the DIB is a small fraction of what it was in 1990 due to procurement and funding policies that didn’t account for the impact on industrial base capacity, both at the prime contractor and for the supporting supply chains. As a result, we can’t produce sufficient platforms or weapons systems for the Sea Services on time or within budget to maintain the current force structure, post-delivery, or sustain them during a protracted conflict. Since the last publication of the Maritime Policy Statement, Congress has recognized this challenge and has appropriated billions of dollars to rebuild the DIB and OSD/Navy are taking actions to address these issues rapidly. However, it will take many years of sustained investment to rebuild what we need to address current and evolving threats. The Navy League applauds and strongly supports continuing and increasing these investments to ensure we have the force structure with the requisite readiness to deter adversaries.
Since the end of the Cold War, the defense sector has consolidated substantially, transitioning from 51 to 5 aerospace and defense prime contractors. Additionally, there has been an associated net loss of 17,000 Defense sector companies over the last 5 years and a 40% reduction in small business participating in the DIB over the last 10 years. As a result, DoD is increasingly reliant on a small number of contractors for critical defense capabilities. Further consolidations that reduce required capability and capacity and the depth of competition would have serious consequences for national security resulting from increased cost and decreased incentive to innovate.
Over approximately the last three decades, the number of suppliers in major weapons system categories has declined substantially. According to the Department of Defense’s “State of Competition within the Defense Industrial Base” report: tactical missile suppliers have declined from 13 to 3, fixed-wing aircraft suppliers have declined from 8 to 3, and satellite suppliers have halved from 8 to 4. Today, 90% of missiles come from 3 sources. As a result, promoting competition and ensuring it is fair and open for future programs is a critical priority.
Additionally, peacetime missile and precision munition production capacity has been funded at such an inadequate rate that it would take years to replace expected consumption in the first few weeks of a future major conflict, just as it took several years to replace the Tomahawks used during the Gulf Wars. However, in contrast to conflicts since the end of the Cold War, future protracted conflicts with a peer competitor will be subject to contested supply chains, and we won’t be able to wait years for weapons resupply. We must build up stocks of critical weapons ASAP and develop secure means of resupply in addition to establishing the ability to rapidly generate additional production capacity to meet demands after wartime reserve stocks are consumed.
As for the shipbuilding industrial base, 14 U.S. shipyards that constructed ships for the Navy have closed since the 1960’s, and three have left the defense industry. Only one new shipyard has opened. As a result, just eight shipyards, owned by five prime contractors, build large Navy warships and Coast Guard cutters today.
Among the seven large U.S. Navy shipyards, ship-class specialization is the norm. This lack of competition, at both the prime and lower tier suppliers, has resulted in shipbuilding costs exceeding inflation so that fewer ships can be acquired annually even if annual appropriations increase in step with inflation. A similar situation can be found in the tactical aviation industrial base.
Going one level deeper, the number of Navy shipbuilding suppliers for nuclear-powered submarines and aircraft carriers dropped by more than two-thirds over the past 25 years, and more than 65 percent of remaining suppliers are the single- or sole-source for their product. This sharp contraction occurred after the Navy dropped from procuring four submarines per year from 1977 through 1996 to just one submarine per year from 1998 through 2010 (except zero submarines being procured in 2000). The submarine industrial base has lost thousands of suppliers since the Cold War and must expand to address the current requirement to deliver 2.3 boats per year. Submarines have unique requirements of stealth, endurance, and survivability which have no commercial equivalency. This requires a robust industrial base with unique capabilities.
The commercial shipbuilding industrial base also has similar concerns. Several of the larger classes of surface combatant and auxiliary ships have been built in only one or two shipyards. As a result, price and technical competition are limited and the ability to increase production to meet future requirements is constrained without major infrastructure investments. Low throughput rates have also caused major cost increases from domestic suppliers which also may need financial support to ensure domestic or allied sources of critical components and weapon systems.
The ship repair industrial base presents its own set of problems. The Navy’s four government-owned shipyards are incapable of keeping up with the current nuclear ship repair demand and they need major capital investments to upgrade infrastructure and modernize workflows. Also, additional drydocks are needed and some must be upgraded to accommodate the large Virginia payload module and Columbia class submarines. To address these deficiencies, the Navy’s established the Submarine Infrastructure Optimization Program (SIOP), initially programming $21B in expenditures over 20 years. However, recent bids indicate that much more funding will be needed and the likelihood of increased submarine production will require acceleration of this effort. The movement of some nuclear ship repairs to commercial yards has not gone as planned and it will require additional time and expense before they can accommodate the additional workload. Conventional ship maintenance repair has been hampered by the lack of dry-dock facilities, especially on the West Coast. Investment to expand such capabilities will require new acquisition strategies that ensure stable workloads to justify such expenditures.
While the shipbuilding industrial base is probably in the worst shape, other segments require accelerated focus and support. These challenges include relying on foreign and single-source suppliers for critical materials, replacing obsolete parts on weapon systems that could be in operation for decades, and protecting weapon systems from cybersecurity threats, among others.
We must do more to protect the intellectual property developed by our industrial base so that the technical edge it provides, such as in directed energy, artificial intelligence, and hypersonics, is not stolen by our adversaries through cyber-attacks or industrial espionage. Our technological edge must be maintained since we no longer have the capacity edge in numbers of missiles, aircraft, or ships.
Below is more detail on the severity of the problem. Since the National Defense Industrial Strategy (NDIS) and other actions below do not specifically address the Defense Transportation Industrial Base, including the Marine Transportation System (MTS), the U.S.-flag Merchant Marine is addressed in a separate section and the MTS is included before the recommendation in this section.
To rebuild the industrial base, upon which the Sea Services depend, requires a long-term strategy and associated resources to implement that strategy. The first such strategy was finally released in January 2024 and provides a comprehensive framework to restore the Defense industrial base. Rather than repeat what is in that document , relevant sections pertaining to the Sea Services will be highlighted. The Introductory section of NDIS is a superb summary of how we got to our current situation and provides the following four priorities as a framework reverse it.
Resilient supply chains that can securely produce the products, services, and technologies needed now and in the future at speed, scale, and cost.
Workforce readiness will provide for a sufficiently skilled, and staffed workforce that is diverse and representative of America.
Flexible acquisition will lead to the development of strategies that strive for dynamic capabilities while balancing efficiency, maintainability, customization and standardization in defense platforms and support systems. Flexible acquisition strategies would result in reduced development times, reduced costs, and increased scalability.
Economic deterrence will promote fair and effective market mechanisms that support a resilient defense industrial ecosystem among the U.S. and close international allies and partners and economic security and integrated deterrence. As a result of effective economic deterrence, fear of materially reduced access to U.S. markets, technologies, and innovations will sow doubt in the mind of potential aggressors.
As detailed in the National Security Strategy and National Defense Strategy, the PRC is the United States’ pacing challenge. As a means to implement “Economic Deterrence”, DoD must work with Congress, other executive departments and global Allies and partners to eliminate defense industrial dependencies emanating from the PRC. The defense of the nation must not be held at risk by reliance on those who might seek to undermine it.
As the National Defense Strategy (NDS) states, "…we will prioritize coordinated efforts with the full range of domestic and international partners in the defense ecosystem to fortify the defense industrial base, our logistical systems, and relevant global supply chains against subversion, compromise, and theft." The NDIS offers a strategic vision to coordinate and prioritize actions to build a modern defense industrial ecosystem that is fully aligned with the NDS. It also calls for sustained collaboration and cooperation between the entire U.S. government, private industry, and our Allies and partners abroad.
The NDIS calls for a fundamental change to the culture of those responsible for setting requirements and for acquiring platforms and systems to meet those requirements. It states we need to orient acquisition policy for aggressive expansion of production capacity:
“The DoD’s acquisition process is a structured series of steps and activities used to acquire goods and services for the U.S. military. Typical peacetime acquisition reform tends to place more emphasis on greater efficiency, cost effectiveness, transparency, and accountability. Today’s threat environment, however, necessitates acquisition reform that includes efforts to revitalize the defense industrial base, and potentially, rapid expansion to prepare for pacing security challenges. This will require substantial changes to existing acquisition mechanisms. Correspondingly, there will need to be a change of acquisition mindset that includes increased flexibility and risk tolerances and embracing “fail fast” and similar concepts. Risk aversion must be replaced by aggressive, learning mindsets in both developing and fielding systems underpinned by strong commitments of accountability and responsibility. Crisis period acquisition policy reform tends to favor better-resourced defense companies. As such, DoD will work to stimulate industry diversification through focused policy directives to help small businesses navigate the complex defense acquisition process. DoD will work to reform acquisition policies that unnecessarily burden or restrain the nation from rapidly attaining a proper, robust defense production posture while simultaneously fostering supplier diversification with a slate of programs referenced elsewhere in this strategy.”
The NDIS called for unclassified and classified implementation plans to address the actions needed to provide the ways and means to realize its goals and objectives.
This report highlights how funding enacted under Ukraine supplemental appropriations in 2021-2023, the 2022 Inflation Reduction Act, and, most recently, the FY2024 National Security Supplemental Appropriations Act has bolstered DoD's investments in the defense industrial ecosystem. Combined FY2024 supplemental and base defense appropriations will inject $74.6 billion for defense industrial base investments, including much-needed modernization of the submarine industrial base and replenishment of weapons sent to Ukraine, Israel, and Taiwan. Specific Sea Service related investments include $20M to Austal USA to enhance U.S. Navy shipbuilding capabilities, awarding multi-year munition contracts for Naval AMRAAM, Naval Strike Missile, LRASM and JASSM, funding regional submarine workforce talent signing days celebrating 2,700 individuals starting careers with maritime industry suppliers, and Secretary of Navy formation of the Maritime Economic Council which supports his Maritime Statecraft approach to strengthen industries that are vital to enhancing U.S. maritime power.
National Defense Industrial Strategy (NDIS) Implementation Plan (NDIS-IP) for 2025
The NDIS-IP details the ongoing and planned actions taken by DoD to achieve the vision set forth in the NDIS and to address key challenges to the U.S. industrial base. Our commercial and organic defense industrial bases, skilled manufacturing workforce, and American ingenuity produce high-end systems and products that provide our Armed Forces with a competitive advantage. The NDIS-IP prescribes the necessary steps to align future investments in industrial capacity and resilience across the Military Services and the Office of the Secretary of Defense.
The NDIS-IP for 2025 focuses its effort on six initiatives derived from the NDIS associated with those risks determined that must be mitigated as soon as practicable:
1 Indo-Pacific Deterrence
• Inability to compete globally results in a decrease in DIB exports and market share
• Supply and material shortfalls result in the inability to meet the pacing challenge and production requirements
• Fragile supply lines result in the inability to meet production requirements
2 Production and Supply Chains
• Inability to successfully onshore critical manufacturing results in production disruption
• Limited spare capacity results in supply chains unable to surge and respond to shocks
3 Allied and Partner Industrial Collaboration
4 Capabilities and Infrastructure Modernization Implementation Initiative 5 Implementation Initiative
• Reduced worker productivity decreases productivity throughout the supply chain
• Sustainment and logistics challenges result in the inability to sustain necessary platforms and material chains unable to surge and respond to shocks
5 New Capabilities Using Flexible Pathways
• Lack of skilled workforce results in limited innovation
• Increased technological risk results in critical technology production being disrupted
• Mismatch between acquisition strategy/pathway and outcome to be achieved
6 IP and Data Analysis
• IP theft and adversarial capital IP control results in loss of critical IP
• Degraded technological edge, innovation, and quality results in loss of technological advantages
• Loss of trust and reputation results in degradation of security commitments
Each Initiative is tied to one or more of the NDIS Priorities and is associated with several Lines of Effort (LOE). Each LOE is assigned a Risk Mitigation frame (Immediate, Medium, or Long-Term), Risks of Inaction to U.S. National Security and Defense Industrial Ecosystem, and Outcome Metrics. Each LOE is then assigned to Responsible Organizations(s) and broken down into specific Tasks, Performance Metric(s) and Estimated Completion dates with specified Desired Outcomes, Risk Mitigation & Challenges, and Estimated Resources. More than 50 pages are devoted to these 20 LOEs and the programs associated with each specific task,
In addition to the $39.4B spent for programs supporting the NDIS-IP in FY2024, an additional $37.7B is in the FY2025 budget submission. Regarding Navy-specific programs, $3.3B was allocated for the Submarine Industrial Base (SIB) in FY2024 and $3.3B for FY2025, including significant investments for workforce development. The largest expenditures are for Missiles and Munitions, amounting to about $30B in both years, much for Navy surface-to-air, air-to-air, and surface-to-surface missile production.
The investments identified in the NDIS-IP are a good start in rebuilding critical elements of the Defense Industrial Base that had been lost since the end of the Cold War. Sustained investments in these areas and others in the future will be required to overcome essential deficiencies in the short, medium, and long term. The NDIS-IP will be updated annually and include DOD’s progress in reports to stakeholders, including Congress, along with the Industrial Capabilities Report, and will track output performance metrics.
In September 2023, the Secretary of the Navy initiated an effort to address many of the issues raised in this section. In his DON Three Year Review transmitted in ALNAV 66-24 of 9AUG24 he writes:
-Transforming Naval Shipbuilding. A bedrock to Maritime Statecraft is an advanced, robust, and efficient shipbuilding capability. Earlier this year I tasked a 45-day shipbuilding review to assess the longstanding causes of shipbuilding challenges and provide recommended actions for a healthier shipbuilding industrial base. The review found common issues driving delays and other challenges across the Navy's shipbuilding programs, including first of class design challenges and the wide-ranging challenges on workforce recruiting, retention, and proficiency for shipbuilders and suppliers. We are working alongside industry to tackle immediate challenges and implement improvements across the shipbuilding enterprise. This includes the establishment of a Direct Reporting Program Manager for the Maritime Industrial Base and providing a long-term, steady demand signal to improve the health and capacity across the industrial base and deliver critical capability at a lower cost to the taxpayer. Additionally, through initiatives like the Taxpayer Advocacy Project, our contract community and Office of General Counsel are ensuring that we will leverage all legal means at our disposal to hold companies and individuals accountable to ensure that the American people are getting what they paid for. The success of the Australia-United Kingdom-United States security agreement is just one example of how continued focus on strengthening our relationships with international partners can reduce barriers for industrial cooperation and expand the shipbuilding enterprise, to include building our combined conventionally armed, nuclear-powered submarine capability.
- Seapower Through Commercial Shipbuilding. A key tenet of Maritime Statecraft is the recognition that no great naval power has long endured without also being a commercial maritime power. Making naval shipbuilding more cost effective requires we restore the competitiveness of U.S. commercial shipping and shipbuilding. We continue to build awareness and advocate across this Administration that long-term solutions to many of the Navy's challenges require we renew the health of our nation's broader seapower ecosystem. This past year we drove the creation of the Government Shipbuilders Council. This Council brings us together with Maritime Administration, Coast Guard, National Oceanic and Atmospheric Administration, and Army to tackle common challenges in ship construction and maintenance. We've catalyzed multiple White House-led interagency processes on both naval and commercial shipbuilding, bringing together the National Security Council, National Economic Council, and Departments across the Executive Branch. In conjunction with our partners in Congress, our team is working to reinvigorate existing but unfunded authorities and craft new incentives to build and flag commercial ships in the U.S.-efforts that will offer significant returns to Navy shipbuilding and sealift.
- Developing the Shipbuilding Workforce. Maritime Statecraft builds upon a partnership with government and industry leaders to expand our shipbuilding workforce and provide compelling opportunities for a new generation of American shipbuilders. This includes supportingand expanding programs to build capacity in naval architecture and engineering as well as technical expertise in nuclear welding, robotics, software and electronics, and additive manufacturing. We are working at the federal and state level to improve shipyard communities and mobilizing the world-class industrial workforce of America's North Coast. We are engaging with organized labor as an essential stakeholder. This year, the Navy launched an innovative program to train union welders in construction trades for shipbuilding work, and deploy them as a rotational, expeditionary workforce to shipyards. Shipbuilding workforce initiatives like this will help us deliver ships to the fleet in a timely manner to advance our national interests and deter China and other adversaries.”
Extracts from the press release for this report follows:
Background
Section 301 of the Trade Act of 1974, as amended, (Trade Act) is designed to address unfair foreign practices affecting U.S. commerce. Section 301 may be used to respond to unjustifiable, unreasonable, or discriminatory foreign government acts, policies, and practices that burden or restrict U.S. commerce. The Section 301 provisions of the Trade Act provide a domestic procedure through which interested persons may petition the U.S. Trade Representative to investigate a foreign government act, policy, or practice and take appropriate action.
On March 12, 2024, five national labor unions filed a petition requesting an investigation into the acts, policies, and practices of China targeting the maritime, logistics, and shipbuilding sectors for dominance. The five petitioner unions are:
• the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL-CIO CLC (“USW”);• the International Association of Machinists and Aerospace Workers (“IAM”);• the International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers and Helpers, AFL-CIO/CLC (“IBB”);• the International Brotherhood of Electrical Workers (“IBEW”); and• the Maritime Trades Department, AFL-CIO (“MTD”).
The petition was filed pursuant to Section 302(a)(1) of the Trade Act (19 U.S.C. § 2412(a)(1)), requesting action pursuant to Section 301(b) (19 U.S.C. § 2411(b)).
Pursuant to Section 302(a)(2) of the Trade Act (19 U.S.C. § 2412(a)(2)), the U.S. Trade Representative reviewed the allegations in the petition and determined to initiate an investigation regarding the issues raised in the petition. On April 17, 2024, the U.S. Trade Representative requested consultations with the government of China pursuant to Section 303 of the Trade Act, (19 U.S.C. § 2413).
Upon finding that the act, policy, or practice is actionable under section 301 of the Trade Act, the U.S. Trade Representative must determine what action, if any, to take in order to obtain the elimination of that act, policy, or practice. The determination on any responsive actions would be considered at a later date in the next stage of the investigation.
Findings
The U.S. Trade Representative has issued findings in the Section 301 investigation of the People’s Republic of China’s (PRC) targeting the maritime, logistics, and shipbuilding sectors for dominance, concluding that the PRC’s targeted dominance in these sectors is unreasonable and burdens or restricts U.S. commerce, and is therefore “actionable” under Section 301.
“Today, the U.S. ranks 19th in the world in commercial shipbuilding, and we build less than 5 ships each year, while the PRC is building more than 1,700 ships. In 1975, the United States ranked number one, and we were building more than 70 ships a year,” Ambassador Katherine Tai said. “Beijing’s targeted dominance of these sectors undermines fair, market-oriented competition, increases economic security risks, and is the greatest barrier to revitalization of U.S. industries, as well as the communities that rely on them. These findings under Section 301 set the stage for urgent action to invest in America and strengthen our supply chains.”
The determination is supported by a comprehensive report, which is available here.
USTR’s investigation found the PRC’s targeting for dominance unreasonable because it displaces foreign firms, deprives market-oriented businesses and their workers of commercial opportunities, and lessens competition and creates dependencies on the PRC, increasing risk and reducing supply chain resilience. The PRC’s targeting for dominance is also unreasonable because of Beijing’s extraordinary control over its economic actors and these sectors.
USTR further found that PRC targeting for dominance burdens or restricts U.S. commerce by undercutting business opportunities for and investments in the U.S. maritime, logistics, and shipbuilding sectors; restricting competition and choice; creating economic security risks from
dependence and vulnerabilities in sectors critical to the functioning of the U.S. economy; and undermining supply chain resilience.
As the petitioner U.S. unions have highlighted, the entrenchment of the PRC’s dominance means that U.S. international trade is “carried out on vessels made in China, financed by state-owned Chinese institutions, owned by Chinese shipping companies, and reliant on a global maritime and logistics infrastructure increasingly dominated by China.”
The Federal Register notice summarizing the determinations is available at the following link.
The results of this investigation provide a basis for finding that responsive action is appropriate. Any determination on responsive actions would be considered in the next stage of the investigation.
This bipartisan, bicameral commission was established in the 2022 NDAA to report on the National Defense Strategy. This report has informed the language in the FY2025 NDAA and will produce the basis for future Congressional authorizations and appropriations. The report includes a comprehensive list of deficiencies in the current Defense Industrial Base (DIB) and makes numerous recommendations on how to address them. The following are quotations from its report of July 2024:
The Commission finds that the U.S. defense industrial base is unable to meet the equipment, technology, and munitions needs of the United States and its allies and partners. A protracted conflict, especially in multiple theaters, would require much greater capacity to produce, maintain, and replenish weapons and munitions. Addressing the shortfall will require increased investment, additional manufacturing and development capacity, joint and coproduction with allies, and additional flexibility in acquisition systems. It requires partnership with an industrial base that includes not just large, traditional defense manufacturers but also new entrants and a wide array of companies involved in sub-tier production, cybersecurity, and enabling services. The United States should coordinate and partner with its allies in mutually beneficial ways to increase industrial capacity, especially since the U.S. industrial base is unable to produce everything needed.
DoD faces a disconnect between its operational planning and its industrial planning. The war in Ukraine is a reminder that modern warfare at an industrial scale requires a tight connection between the needs of warfighters and the priorities of industrial base policy. Mobilizing the U.S. industry in the event of a protracted conflict requires DoD, as well as interagency and industry partners, to engage in detailed planning tailored to specific contingencies.
Finally, the United States needs to prepare for the possibility that future wars will be protracted. As the United States’ recent experiences in Iraq, Afghanistan, and Ukraine demonstrate, modern wars often last a long time. If the United States becomes directly engaged in great power conflict, the war will likely last more than a few weeks or a few months. The United States must therefore ready its forces and its industrial base for the potential of protracted conflict.
Problems with lack of DIB capacity are particularly acute for the U.S. shipbuilding industrial base. As a result, the Navy’s ability to construct, maintain, and repair the maritime forces it requires is fundamentally in doubt. For the past two decades, the Navy has been shrinking as ship retirements have largely outpaced the procurement of new ships. However, recognizing that China’s navy has more battle force ships and significantly larger production capacity, the U.S. Navy has sought to reverse its decline and set a goal of fielding 381 battle force ships, up from 287 today. As described before, the U.S. shipbuilding industry faces major obstacles to producing this number of vessels, including destroyers and Virginia- and Columbia-class submarines, until at least 2042 and only with significantly increased investment and expanded capacity of the shipbuilding industrial base. Aside from building ships, the DIB cannot repair and maintain them at the speed needed. One Chinese shipyard has more capacity than all U.S. shipyards combined. As former Marine Corps Commandant David Berger warned in 2020, replacing ships lost in combat will be problematic, inasmuch as our industrial base has shrunk, while peer adversaries have expanded their shipbuilding capacity. In an extended conflict, the United States will be on the losing end of a production race—reversing the advantage we had in World War II when we last fought a peer competitor.
More often, the domestic constraints are not specified, but their impact is clear: The defense budget imposes limits on force size and structure; the weakness of the defense industrial base (DIB) constrains rapid growth of platforms, munitions, and other needed equipment; and the domestic political climate complicates recruitment and distracts from crucial security issues. As an independent body, the Commission has the flexibility and the responsibility to be more explicit in discussing these limitations and laying out aspirational visions of success.
Congress should revoke or override the caps in the 2023 Fiscal Responsibility Act. For FY 2025, real growth in defense and nondefense national security spending is needed and, at a bare minimum, should fall within the range recommended by the 2018 NDS Commission. While other reforms described elsewhere in this report are being made, increased spending should be allocated to prioritize near-term readiness demands to restore and reinforce deterrence. Supplemental funds should begin a multiyear capital investment in additional capacity, including growing the capacity of the industrial base. Future defense budgets should put defense and other components of national security on a glide path to support efforts commensurate with the U.S. national effort seen during the Cold War. Larger amounts of defense spending should be accompanied by sufficient resources to build capacity at other departments and agencies that contribute elements to national power.
Congress should pass a supplemental appropriation immediately to begin a multiyear investment in the national security innovation and industrial base. Funding should support U.S. allies at war; expand industrial capacity, including infrastructure for shipbuilding and the ability to surge munitions production; increase and accelerate military construction to expand and harden facilities in Asia; secure access to critical minerals; and invest in a digital and industrial workforce.
The recommendations throughout this report will require increased resources and the political will to engage internationally that requires the support of a well-informed public. The American people will need to pay for the increases in federal outlays to build the force needed. The American public will have to produce the people to serve in the military, the public sector, and the industrial base. While it is incumbent on political leaders—particularly the President—to make the case for the need for a strong and engaged United States, it cannot be done without the public’s support.
The Navy League’s Grassroots Advocacy program will be critical in making the case that the recommendations proposed by the Commission be funded expeditiously.
The U.S. Marine Transportation System (MTS) consists of waterways, ports and their intermodal connections, vessels and vehicles. The more than 40,000 American-built, American-crewed vessels operating in domestic maritime transportation contribute more than $154 billion per year to the U.S. economy. These vessels move more than one billion tons of cargo annually, create over 650,000 jobs and generate $41B in labor compensation according to the American Maritime Partnership. Additionally, annual taxes generated by the domestic fleet top $16 billion, and any increased revenue should be invested in reducing the billions of dollars in backlogged maintenance to upgrade/replace much of the obsolete and unreliable river lock-and-dam infrastructure. The system can carry huge additional amounts of freight and petroleum products at a fraction of the cost of other transport modes. The American Association of Port Authorities states that in 2024 ports generated 2.5 million jobs, including 1 million port workers, $214B in wages and benefits, and $311B in economic activity.
The U.S. Army Corps of Engineers dredging and new construction program funds projects such as a second Poe-sized lock on the Great Lakes, which will prevent a shutdown of the Great Lakes trade and economy if the current single lock fails. Other programs fund the U.S. Coast Guard upgrades to aids-to-navigation in river and harbor channels that connect U.S. ports to the world. The Harbor Maintenance Trust Fund (HMTF), resourced from the Harbor Maintenance Tax (fees of about $2 billion a year), was intended to pay for the construction and maintenance of harbor and navigation channels and aids when it was developed in 1986. The Water Resources Reform and Development Act (WRRDA) of 2020 set targets for increasing expenditures by using up the $10B surplus by 2030 (amounting to total of $3.15B for FY 2025) to reduce billions of dollars in project backlogs, including urgent investments to accommodate the larger ships using the expanded Panama Canal. Additionally, the Bipartisan Infrastructure Law of 2022 provides an additional $450M/year through 2025 for port improvements to counter the impacts of climate change and to enhance supply chain throughput and included $2.5B in inland waterways projects.
As one of the world’s trade leaders, the United States requires a technologically advanced, secure, efficient and environmentally sound MTS. Our economic prosperity is dependent on international trade, of which more than 99% of overseas trade, by weight (excluding Canada and Mexico), moves by water. Roughly $2 trillion of trade flows through U.S. ports. Trade flowing through the nation’s ports and waterways is expected to increase substantially by 2030, creating greater congestion on overburdened land, port, water, passenger, and freight delivery systems. Only a truly seamless, integrated, multimodal transportation system with an expanded AMH system as part of the National Freight Strategic Plan and associated National Maritime Transportation Strategy will meet the nation’s growing needs.
· Fully supporting the SHIPS for America Act legislative proposal that will, when enacted, reinvigorate the U.S. Maritime Industry so that it can fully support economic and national security of the United States
· Continued accelerated and additional funding to address Congressional and Administration shortfalls identified in the National Defense Industrial Strategy and the Commission on the National Defense Strategy to provide the capacity to produce major combat and weapon systems to support wartime operations with a peer competitor.
· Sizing the shipbuilding industrial construction and repair base via a national shipbuilding industrial base strategy, to meet the aspirational goal of the force structure that the Navy, USCG, and MARAD determine, while acknowledging the national fleet of the future will change in mix of manned and unmanned platforms and adapt to supporting more distributed operations to take back the initiative in a great power conflict.
· Full funding of the Navy’s shipbuilding plan with stable long-term milestones to ensure the buildup of a more integrated and larger naval fleet in a way that allows the defense industrial base to make long-term investments to accommodate expected growth to counter the challenges from peer competitors such as China.
· Funding the expansion in the number of prime, second tier, and below competitors to create greater capacity, redundancy, and resiliency to accommodate the capacity buildup and technological innovation necessary to deter and, if necessary, defeat peer competitors.
· Increased and accelerated funding for the SIOP, to ensure the expanded submarine fleet can be properly maintained.
· Full funding of the procurement of sufficient weapons and munitions to meet initial operation plan requirements (war reserve stocks) until mobilized industrial base production can meet consumption since today’s inventories are woefully inadequate to counter a peer competitor in a contested environment. Additionally, there has been substantial war-gaming support to justify a recommendation that the Navy fund vertical-launch system rearming capability at sea to allow combatants to remain on station for longer periods.
· Supporting the Secretary of Navy Maritime Statecraft initiatives that will integrate Allied capabilities and investments into the Naval and Maritime shipbuilding construction and repair industrial base, including overseas repairs, as long as such initiatives do not negatively impact the efforts to stabilize and increase domestic shipbuilding construction repair demands and funding that will be needed to support current and future peacetime repair and wartime battle damage repair requirements, including for mobilization.
· A Harbor Maintenance Tax exemption for waterborne cargo shipped between U.S. ports. Taxes should only be paid when imports first land in the United States to eliminate a disincentive for increased domestic waterborne transport.
· Full funding for the U.S. Army Corps of Engineers dredging and new construction projects at the amount called for in the 2024 WRDA and including a record $3.147B appropriation from the Harbor Maintenance Trust Fund for FY2025 (awaiting FY2025 appropriations).
· Use of all receipts received in the Inland Waterway Trust Fund to repair/replace aging infrastructure on the inland waterway system.
· Increased investment in maritime research, and development on par with other modes of transportation, including novel technologies such as small modular nuclear reactors for ship propulsion.
· Priority access to terminals, vessel berths, and staging areas at the 17 commercial strategic ports for military cargo that support the short-notice military surge deployments under the National Port Readiness Network. Funding for a MARAD program for contingency contracts may be needed to ensure strategic seaports can guarantee access to staging areas, equipment, and facilities to support major force deployments.
· Efforts to develop a national capacity for the MTS to recover from major disruptions to ensure the continuity of key maritime activities. This should include the maintenance of a robust U.S. salvage vessel and oil spill recovery capability to ensure expeditious clearing of vital channels and harbors.
· Increased share of grants for funding intermodal and freight-related maritime projects from provisions in the Infrastructure for Rebuilding America and Better Utilizing Investments to Leverage Development Transportation Discretionary Grants programs. These grants, and the credit assistance provided through the Department of Transportation’s Transportation Infrastructure Finance and Innovation Act and Railroad Rehabilitation Improvement Financing programs, can help improve the movement of freight through ports and reduce congestion.
