From Defense One, December 12:
The war in Ukraine—combined with worker shortages, inflation, and other factors—has made it more difficult and more expensive to produce the most in-demand weapons.
SIMI VALLEY, California—With Pentagon budgets headed for a new record, defense officials and industry executives wonder: Can contractors fulfill all the outstanding weapons orders?
Defense spending could rise 10 percent in 2023, though relatively few U.S. troops are deployed in conflict zones around the world. A good chunk of the increase is meant to rush weapons to Ukrainian forces fighting off the Russian invasion and replenish the U.S. missiles, artillery, and other weapons donated to Kyiv.
But it’s not clear whether defense companies—and more importantly, the thousands of small businesses that supply them—can meet the demand, due to a confluence of worker shortages, record-high inflation, and supply-chain disruptions that have been exacerbated by a years-long pandemic and an uncertain economic outlook. On top of that, executives say the Pentagon has been slow to award contracts to rebuild weapon stockpiles. Those that were awarded quickly were fast-tracked by top-level Biden administration officials.
This all comes as Congress is positioned to approve tens of billions of dollars more in defense spending for fiscal 2023 for new weapons for the U.S. military and Ukraine.
“The real question is, can we actually build it?” Raytheon Technologies CEO Greg Hayes said in an interview. “They can appropriate all the money, but...if we take months and months and months to get on contract, that's months and months of delay.”
Many defense firms will enter 2023 short of the workers needed to fulfill anticipated Pentagon orders to replace weapons sent to Ukraine, and to design and build new-generation weapons to counter China. High inflation rates are pinching small suppliers, and Pentagon officials have so far been hesitant to renegotiate fixed-price contracts that are advantageous to taxpayers. On Capitol Hill, a split Congress—where Democrats control the Senate and Republicans the House—is expected to once again make defense spending a bargaining chip, as it has been over the past decade.
Nearly three months into the new fiscal year, Congress has yet to pass a 2023 budget, something that has become the new normal. That means spending is frozen at 2022 budget levels.
“The whole system has adjusted in an unhealthy way to expect that,” said Mackenzie Eaglen, a senior fellow at the American Enterprise Institute. “What you see are program officers holding cash and awards for contracts … then there's the bulging spending at the end of the fiscal year in the last six months—and sometimes it's not spent well, because it's in a hurry.”
Lawmakers have signaled a willingness to approve more money for the Pentagon, particularly to make up for lost purchasing power that comes with inflation. Congress is poised to pass a National Defense Authorization Act OKing $45 billion more than the Biden administration requested for 2023. But until lawmakers approve an appropriations measure, that additional cash will not be there to spend....
....MUCH MORE
The money's coming. From Reason Magazine December 19:
Biden Is Set To Sign $858 Billion Pentagon Budget—One of the Biggest Ever
