Current consolidation has put the entire DIB on the brink- further moves ensure innovation collapse and supply chain shortages

Editorial Director of Air & Space Forces Magazine, with more than 25 years at the publication and more than 34 years in defense journalism; New Pentagon Report Raises Alarm Over Industry Consolidation, Future of Competition; Air & Space Forces Magazine; https://www.airandspaceforces.com/new-pentagon-report-raises-alarm-over-industry-consolidation-future-of-competition/

The Defense Department faces a future of high-price, sole-source contracts, reduced innovation, and possible critical shortages if it doesn’t take steps to increase competition and the number of suppliers in the defense industrial base, according to a new Pentagon report. But changing the conditions creating the situation won’t be easy, it said. To prevent these issues, the U.S. must limit further defense industry consolidation; fix intellectual property issues; attract new businesses to the industry—especially small businesses—and put “sector-specific supply chain resiliency plans” into effect for critical items, ranging from missiles to castings, strategic metals, and microelectronics, according to the report, released Feb. 15. The DOD noted that, since the 1990s, defense and aerospace primes have dwindled from 51 companies to just five mega-companies and that further consolidation “would have serious consequences for national security.” Over the last 30 years, for example, “tactical missile suppliers have declined from 13 to three, fixed-wing aircraft suppliers declined from eight to three, and satellite suppliers have halved from eight to four. Today, 90 percent of missiles come from three sources,” the Pentagon said. Reduced competition and fewer suppliers “may leave gaps” in filling defense needs and “remove pressures to innovate to outpace other firms.” The taxpayer will suffer, as “leading firms leverage their market position to charge more, and raise barriers for new entrants,” the Pentagon said. Single-point dependencies are also a strategic vulnerability if the supply chain is broken or a sole-source is “influenced by an adversary nation,” states the report.