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Readers who subscribe for light-hearted essays about the world around us will be disappointed in today’s offering, but I urge you (them) to read on anyway. My professional life is devoted to the naval strength of the United States, and I occasionally use this space to advance ideas in that pursuit.

Also—I am releasing this piece earlier than I intended because the good folks at the Center for Strategic and International Studies put out a big report today (1/23) that my essay reinforces.

Each year, the Ronald Reagan Presidential Foundation and Institute sponsors a day-long forum at the Reagan Library in Simi Valley, California. The event brings together policy types, industry, active duty and civilian DoD leaders, and a lot of just-plain-interested-Americans for a day-long series of panels and speeches centered on American National Defense. I have been fortunate to attend all but one of these gatherings (damn you, 2018 flu) in no small measure due to the forbearance and charity of Roger Zakheim, the man who brought them into existence. During the latest version of the series (3 December 2022), I had an epiphany worth sharing.

Double click the Youtube embedded above—which is the video of the day’s proceedings—and cursor over to the 2 hour 19 minute mark or so. During a panel devoted to issues in the U.S. defense industrial base, Chairman, President, and Chief Executive Officer of Lockheed Martin James D. Taiclet uttered the following words:

“The U.S. defense industrial base is scoped for maximum efficiency at peacetime production rates.”

I have been to numerous Reagan Forums (Fora?) and have spent more than my share of time listening to senior leaders in government and industry speak about defense issues in the past forty years. At no point in the past have I been tempted to stand up and cheer in a most inappropriate manner. On this day, in this moment, I nearly went for it.

I don’t know Taiclet. I have to imagine he’s a bright fellow, what with his current responsibilities and his resume. I have no idea if he is a spectacular public speaker or a towering intellect. I only know that in fourteen economical words, he was able to describe the central problem of American national security better than anyone else in existence.

I can imagine that there are those among you—dear readers—who think I’m being hyperbolic, that what he said isn’t all that insightful. I disagree for two reasons. How he said it and where he said it.

How He Said It

“The U.S. defense industrial base is scoped for maximum efficiency at peacetime production rates.”

Fourteen words (I’m counting U.S. as one word), but three jump out. The first is “scoped”.

When I read the word “scoped”, I read it as a transitive verb, as in someone is doing the scoping. In this case, the scoping is accomplished on both the supply and the demand side of the equation. On the supply side (and with fiduciary duties to shareholders), leaders in the U.S. defense industrial base train, maintain, and sustain the workforce that they believe is most efficient to achieve the demonstrated needs of DoD. They manage internal investments and capital improvements to anticipate actual requirements of their client. Those requirements are best reflected in signed contracts, to include multi-year procurement arrangements. Promises, plans, and assessments are helpful, but no CFO worth his or her salt is going to willingly permit internal investment without significant evidence of government intent. On the demand side, DoD very much seeks to “scope” the industrial base by encouraging competition, which it believes to be in the best interest of creating pricing pressure. More on this below.

The second word that jumps out is “efficiency”. Obviously, what both industry and DoD seek is efficiency, and efficiency is achieved in no small measure…by “scoping”. For industry, this means optimizing profit by controlling costs. For DoD, this means controlling costs through monopsonic behavior and metering demand. Metering demand is a luxury enjoyed by a nation that considers itself at peace. Which brings us to the final word.

The final word worth parsing is “peacetime”, and it drives scoping behavior aimed at efficiency by both parties to production transactions, but it is especially relevant to the demand side.

Where He Said It

Taiclet did not say this at a LM board meeting. He did not say it on the rubber chicken circuit somewhere. He did not say it as he toured the F-35 production line. He said it at the nation’s premier gathering of national security and defense professionals, and as far as I can tell, I am still the only person who pounced on it as important. Again, this COULD be because everyone else finds it to be self-evident, and I am late to the party.

Sitting next to him when he said it was Undersecretary of Defense for Acquisition and Sustainment, Dr. William A. LaPlante. Also on the panel was the Chief of Naval Operations, ADM Michael Gilday. He said what he did to the aforementioned premier national security and defense professionals in the United States, and it feels like only one of them heard him.

Why Is Any Of This Important?

What Taiclet said is important because it demonstrates the colossal mis-alignment that exists between the security environment we are presented with and the military-industrial complex’s (and I use that term with respect and affection) reaction to it. Specifically, a “U.S. defense industrial base scoped for efficient peacetime production” is utterly inconsistent with the industrial base needed to defeat one of the nation’s two most serious adversaries through a determined proxy (Russia, Ukraine), at the same time that it must respond to the #1 strategic challenge—China’s rise. We may not be directly “at war” with Russia, but we clearly are “in war” with Russia, and we are building “for war” with China. That we continue to fund (a.k.a. “scope”) an industrial base for “…efficient peacetime production…” is unwise and will leave us unprepared. How, you may ask?

Capacity. We aren’t building enough ships and planes and missiles and radars and bullets and all of the other stuff we need while we are “in war” with our #2 competitor and preparing “for war” against our #1 competitor. Our workforce, assembly lines, supply chains, and financing structure all work as if it is the late 2000’s, with China’s rise still uncertain and Ukraine in possession of all its traditional territory. The Marine Corps looks to diminish the size of its amphibious force by building fewer large ships, even as it looks to build a small ship that has questionable wartime utility. A Navy that routinely talks about building at least two large surface combatants a year routinely submits budgets with only one a year (this problem appears solved). As long as DoD continues to adhere to peacetime production levels while while its primary adversary produces for war, we will become more and more unready. As long as DoD continues to (correctly and enthusiastically) supply more war material to Ukraine in service to its war with Russia while American production lines mosey along meeting peacetime production goals, we will become more and more unready. No amount of wishing things were different is going to matter. So when U.S. Fleet Forces Commander ADM Daryl Caudle said the following recently,

“I am not forgiving of the fact they’re not delivering the ordnance we need,” he said when asked about balancing the US military’s readiness against the desire to send assistance to Ukraine as it continues to fend off Russian invaders. “All this stuff about COVID this, parts, supply chain — I just don’t really care.” “We’ve all got tough jobs,” he added to audience applause. “I need SM-6 [missiles] delivered on time. I need Mk-48 torpedoes delivered on time.”

he reflected genuine concern about readiness and frustration with industry’s ability to meet production targets, while simultaneously demonstrating a troubling lack of awareness of how we got here. The COVID-driven supply chain nightmares (remember toilet paper?) were not imaginary, and they are resolving at their own pace. Labor force issues—people leaving the labor force, not enough skilled workers to available to add production—are not imaginary. Forty years of doing only what was required to keep desired production lines from failing—was not imaginary. We are a country that wants to pretend it is still at peace. It is not.

Resiliency. Years of harvesting the peace dividend resulted in a DoD that valued efficiency at the cost of effectiveness. Keeping inventory of parts is inefficient but effective; just-in-time manufacturing is efficient. Stockpiling weapons is inefficient but effective; minimum rate production is efficient. Capacity is inefficient but effective; capability is efficient. We have succeeded in creating an industrial base that is optimized for efficient peacetime production and a military that is sub-optimized for wartime activities. We have a resiliency problem, and that resiliency problem makes us less effective. Examples?

Over a decade ago, the Navy conducted a competition to replace its main surface ship radar, the SPY-1 family. The big names among the defense primes all competed, and a major prime won the contract to provide the digital, S-Band radar of the future (SPY 6). The first ship with this radar is nearing completion at Huntington Ingalls in Mississippi, and conducted the first of its builder’s trials last month. I do not know the details of how the SPY-6 winner went about winning the competition to provide this radar, but I am generally aware of how these things work. This was considered by leadership to be a very important program, and they presumably applied considerable internal investment dollars to win it, thinking (with justification) that they would earn this money back in serial production. But in the hyper-efficient Navy, officials determined that a second production source for the radar should be brought online—not to meet any additional production demand (which would have been wise), but solely to create pricing pressure.

The Navy recently attempted to apply the same approach to its main surface ship electronic warfare program. Prime contractor invested significantly to win, won the program, and before the system was even declared at initial operating capability (IOC), the Navy sought to bring on a second source to build the exact same system. Again—not to meet greater demand, but to create pricing pressure.

Two things about these competitions bother me. The first is that while I understand the desire to create competition to bring cost down—adding a competitor does little to increase production capacity (a.k.a readiness for wartime production). The only thing that increases capacity is increased demand. Second—I look at competitions like this and think of how modern, publicly held companies act. And I think about something like—oh—a shipboard high energy laser—something that is REALLY, REALLY important for the future fleet. Let’s say I’m a VP for Advanced Capability at Amalgamated Defense Industries and I head up to see the CFO and tell her I’ll need tens of millions of dollars of internal investment money in order to compete competently for such a program (when and if the Navy ever specs it and actually competes it).

Big Prime CFO when asked for internal investment on program sure to be immediately competed.

“You want how much?” she asks.

“$53 millon” I say.

“You want me to give you $53M to compete for a program you have a less than fifty percent chance of winning, and if we win, the Navy will then compete OUR design for a build to print second source even before we IOC? Are you crazy?” And our high energy laser will remain just around the corner, as it has for decades.

One way to increase resiliency is not to settle up on ONE design for major capabilities. Yes, one design means efficiency, in that you only have to train Sailors to work on one system, you only have to stock parts (to the extent that you stock them at all) to support one system, you only have to work with and negotiate with one industry prime partner.

But then adversaries only have to defeat/counter….one system.

We need to get out of the efficiency uber alles business and back into a mind-set in which we are preparing for conflict in meaningful ways that are often inefficient but which contribute to resiliency. We need more. We need different. We need it now.

In closing…

We are a democracy, and it is our habit to be late to the game where great war is considered. That we have so much experience in this sort of delay should be something that helps us to learn from it, but sadly, it does not appear that we are. Instead, Admirals will stomp about demanding more while the Pentagon manages (scopes) things so as not to do harm to non-defense discretionary spending. When the fight comes, utterly extraordinary things will have to be done to respond, if indeed a response is even mounted—given the steep, comfortable hole we have created for ourselves.

We can choose differently. We can prepare better.

The Conservative Wahoo

We Are Not Serious About War