Pentagon unveils strategy to promote competition in defense industry

The Pentagon unveiled its strategy to address competition within the defense sector, including new methods of strengthening oversight among company mergers and lowering barriers to entry for small businesses.

In a report released on Tuesday, the agency said it will “confront the challenges posed by industry consolidation and work to ensure sufficient domestic capacity and capability in priority industrial base sectors.”

The effort comes as part of the Biden administration’s overall strategy to promote competition across a variety of sectors.

Competition in the defense industry, often referred to as the defense industrial base, “is vital to the department because it improves cost and performance and fosters greater innovation for the products and services needed to support national defense,” a senior administration official told reporters on Monday.

“Insufficient competition may leave gaps. And filling these needs, in some cases, leads to having only a single source, a small number of sources or dependence on adversarial foreign sources for a defense need, which can pose mission or national security risks,” the official continued.

President Biden signed an executive order in July aimed at boosting competition, which among other things was aimed at making broadband services more affordable and limiting noncompete agreements for workers. 

The report released on Tuesday was required under that executive order, as it directed the Pentagon to review the state of competition within the defense sector and take actions to align with the goals of the order.  

According to the report, the Pentagon has grown reliant on a small number of contractors over the past three decades.

For instance, the number of tactical missile suppliers have sharply declined from 13 to three, and the amount of fixed-wing aircraft suppliers has dropped from eight to three. Currently, 90 percent of missiles come from three suppliers.

In the report, the Pentagon said it would strengthen its oversight over mergers, particularly working with the Federal Trade Commission and Department of Justice when a proposed merger would impact the defense industry.

The department also said it would address limitations with intellectual property rights, and work to attract new entrants into the industry through small business outreach and the use of other acquisition authorities aimed at reducing barriers to entry for new businesses.

The Pentagon says it would take steps to ensure supply chain resilience in five sectors: casting and forgings, missiles and munitions, energy storage and batteries, strategic and critical materials and microelectronics.