As recent conflicts consume weapons at a ferocious rate, America’s defense industrial base is becoming more prepared to sustain a major war, according to a new report.
“The trends are moving in the right direction,” Jerry McGinn, who co-authored the study for the Center for Strategic and International Analysis think tank, told Defense News.
However, the study — described as a progress report on reforms to the defense manufacturing and acquisition system — still found numerous problems with ramping up and sustaining wartime production.
For example, “according to several measures — manufacturing lead times, critical munitions and materials stockpiles, and supply chain security — the U.S. industrial base has a long way to go to achieve resilience,” warned the analysis by CSIS’s Center for the Industrial Base.
CSIS did find measurable improvements since November 2025, when Secretary of Defense Pete Hegseth vowed to “transform the entire acquisition system to operate on a wartime footing.”
Hegseth also promised to “inspire American industry to become a wartime industrial base that focuses on speed and volume.”
Most striking is the number of new companies in the defense field.
“Roughly 10,000 new firms have entered the market in the past two years and nontraditional companies received over $120 billion in contract obligations in FY 2025, adding competition and innovation to the sector,” CSIS noted. “Munitions contract obligations have risen 330 percent since FY 2010. Spurred by this increased demand and depleted inventories, the Pentagon is signing multiyear agreements with munitions producers and suppliers on a historic scale.”
The military is also responding to depleted stockpiles of expensive guided weapons that have been rapidly consumed by the Iran and Ukraine wars.
The Pentagon’s 2027 budget request for munitions allocated 49% to low-cost munitions — defined as costing less than $600,000 apiece — rising to 70% by 2031.
The U.S. is also strengthening its defense supply chain, such as “multiyear procurement agreements, direct-to-supplier investments, and leaner acquisition pathways,” as well as investing in defense companies such as L3Harris Missile Solutions, according to CSIS.
However, while this signals government commitment to defense production, it “also complicates competitive dynamics within the industry as new entrants and established suppliers alike seek to meet rapidly growing demand for munitions at scale.”
Also notable is federal investment in rare earths, which has seen production soar from 95 tons in 2022, to 8,900 tons in 2025. Nonetheless, “the erosion of domestic rare earth manufacturing capacity and the rise of Chinese control took decades to unfold, however, and it will take several years of enduring effort for the United States and its allies to build, scale, and sustain the production capacity of these key defense inputs.”
Exports of U.S. arms, or cooperative multinational projects such as the F-35 fighter, have also become a pillar of America’s defense industry. Foreign Military Sales, or FMS, have more than tripled, from less than $20 billion in 2015 to more than $80 billion in 2025.
The Trump administration wants to take this further with the “America First Arms Transfer Strategy,” launched in February 2026.
“The United States will use foreign purchases and capital to support domestic reindustrialization, expand production capacity, and improve the resilience of the United States defense industrial base,” the White House executive order declared.
Ultimately, the federal government can control defense production through the products it demands, the prices it is willing to pay, and the incentives it offers.
“It’s a monopsony,” McGinn said. “Government sets the market. Government can regulate the market. So, if the government wants different outcomes, it changes how it buys.”
Michael Peck is a correspondent for Defense News and a columnist for the Center for European Policy Analysis. He holds an M.A. in political science from Rutgers University. Find him at theuncommondefense.com. His email is mikedefense1@gmail.com.
Facts Only
* Jerry McGinn co-authored a study for the Center for Strategic and International Analysis think tank.
* The U.S. industrial base faces challenges in ramping up and sustaining wartime production despite current trends.
* Manufacturing lead times, critical munitions/materials stockpiles, and supply chain security indicate the U.S. industrial base needs further work to achieve resilience.
* Measurable improvements were found since November 2025 following Secretary of Defense Pete Hegseth's vow to transform the acquisition system for wartime footing.
* Hegseth promised to inspire industry to become a wartime industrial base focusing on speed and volume.
* Roughly 10,000 new firms entered the defense market in the past two years.
* Nontraditional companies received over $120 billion in contract obligations in FY 2025.
* Munitions contract obligations rose 330 percent since FY 2010.
* The Pentagon's 2027 budget request allocates 49% to low-cost munitions, rising to 70% by 2031.
* The U.S. is strengthening the defense supply chain through multiyear procurement agreements and direct-to-supplier investments.
* Federal investment in rare earth production increased from 95 tons in 2022 to 8,900 tons in 2025.
* Foreign Military Sales (FMS) more than tripled from less than $20 billion in 2015 to more than $80 billion in 2025.
* The "America First Arms Transfer Strategy" was launched in February 2026.
Executive Summary
Recent conflicts have accelerated demand for weapons, leading to efforts within America's defense industrial base to prepare for major wartime production. While some reports indicate positive trends in the sector, significant challenges remain regarding the ability to scale up and sustain wartime manufacturing. Specific issues noted include long manufacturing lead times, insufficient stockpiles of critical munitions and materials, and supply chain security concerns, which suggest a gap between stated goals and current operational capacity.
Improvements have been observed since 2025 following commitments by the Secretary of Defense to reform the acquisition system and inspire industry focus on speed and volume. This shift is evidenced by increased contract obligations in the defense sector, with nontraditional companies receiving substantial funding, and a significant rise in munitions contract demands. Furthermore, efforts are underway to address depleted stockpiles through budget allocations favoring lower-cost munitions and strengthening supply chain strategies like multiyear procurement agreements.
Despite these efforts, the process of building resilience faces hurdles, particularly concerning critical inputs like rare earths, where domestic manufacturing capacity remains underdeveloped despite increased investment. The expansion of defense exports has also become a major component, with Foreign Military Sales tripling, prompting policy shifts aimed at linking foreign purchases to domestic reindustrialization. Ultimately, government control over production depends on setting the market demands and incentives.
Full Take
The narrative presents a tension between aspirational government mandates and the deep structural inertia of industrial systems facing acute demand pressure. The key pattern involves the disconnect between stated goals—transforming to a wartime footing, achieving resilience—and the tangible realities of supply chain constraints and established market dynamics. The data points show that while financial flows and contractual obligations are increasing rapidly due to conflict demands, achieving true system-wide resilience requires overcoming deeply entrenched bottlenecks, particularly in critical material sourcing like rare earths.
The theme of government control over production, framed by McGinn's observation of a monopsony, is crucial. This suggests that even with increased private sector activity (new firms and contract growth), the pace and direction of industrial capacity are determined by government purchasing power and regulatory choices. The move toward performance-based contracting and incentivizing volume, as promised by leadership, highlights an attempt to shift this dynamic, but success hinges on overcoming the complexity of the industrial base itself.
A critical implication is the balancing act between external pressures (conflict demand) and internal capacity building. As the U.S. attempts to leverage its defense industry for domestic reindustrialization through export strategies like the "America First Arms Transfer Strategy," it simultaneously confronts the challenge of scaling up supply chains for foundational materials that have historically been subject to geopolitical control. The persistent need for sustained effort in rare earth production illustrates a historical lag where external shocks expose weaknesses in sovereign capacity, suggesting that future resilience is less about immediate spending and more about long-term, coordinated investment in foundational domestic inputs.
Bridge questions: If the government sets the market via purchasing incentives, what specific regulatory mechanisms can be implemented to ensure these incentives do not simply prioritize volume over the necessary security of the supply chain? How will the established competitive dynamics between new entrants and incumbents evolve under sustained wartime pressure, and what role do international dependencies play in this competitive landscape? What metrics should replace simple contract volume to truly assess industrial resilience?
Sentinel — Human
The text reads like synthesized journalistic reporting that effectively weaves quantitative data with expert commentary to explore complex industrial and geopolitical trends.