Inside the Industrial Base
What FY26 Fixes—and What It Doesn’t
America's Defense Production Problem: More Money, Fewer Factories
Original Article: Inside the Industrial Base: What FY26 Fixes—and What It Doesn’t (Please note: The direct link to the original article could not be located, but the content has been thoroughly rewritten based on the provided text and sources.)
The U.S. military has plenty of firepower on paper, but it's critically short where it counts: production lines. War games repeatedly show that in a conflict with China, the U.S. would deplete key munitions in under a week—not from losing battles, but from running out of ammunition. Both the Pentagon and Congress recognize this dire situation, and the recently proposed FY2026 defense budget aims to tackle it head-on with significant funding. However, dollars alone don't build missiles; factories and skilled people do, and both are in alarmingly short supply.
Supply Chains: The Overlooked Strategy
The Pentagon doesn't manufacture weapons; it relies on over 100,000 private companies. A troubling number of these are single points of failure. A 2023 Government Accountability Office (GAO) report revealed that over 90% of the Department of Defense's (DOD) material shortages had only one or zero domestic suppliers [1]. This setup is incredibly fragile.
It's not just about missing parts; it's a strategic vulnerability. Many fundamental components for U.S. weapon systems—like rare earths, titanium, and specialty magnets—come from overseas. The U.S. imports over half of 49 crucial minerals, with China supplying 24 of them [2]. Last year, the Pentagon even had to invoke the Defense Production Act (DPA) to expedite and expand the supply of materials, specifically to get high-purity aluminum, essential for missiles, armor, and aircraft, produced in Iowa again [3]. Without it, warheads can't be built.
While the FY26 budget allocates $1.3 billion to supply chain resilience [4], the GAO estimates it will take over $18 billion to fix all known shortfalls [1]. We've started, but we're far from catching up. High-level budget figures can be misleading; supply chains only care about what actually gets manufactured, not just what's appropriated.
Munitions and the Dwindling Arsenal
The U.S. sending over 3 million 155mm artillery shells to Ukraine served as a harsh stress test of its production capacity—a test we clearly failed.
Some missile programs have seen lead times jump from 19 months to 34 in just two years. By late 2023, the Pentagon had spent $18 billion in supplemental funds simply trying to restock. In response, they've invested $2 billion to ramp up 155mm production, aiming for a sevenfold increase to 1 million shells per year by FY2025 [4]. This is Cold War-era output, and we're years behind in reaching it again [7].
Even with the FY2026 budget's $2.5 billion boost for munitions production [4], capacity remains a major hurdle. The Pentagon admits that many of the 2,000 weapons it plans to acquire this year will be built "at maximum industrial capacity" [4]. This means we can't build faster without constructing more factories.
Congress has authorized multiyear contracts for munitions to provide industry with more predictability [5]. This helps, but only if suppliers have enough parts, people, and power to utilize these contracts effectively. As Rep. Mike Rogers plainly stated, "Arming Ukraine laid bare many of our vulnerabilities, especially with respect to our ability to rapidly produce and field munitions."
The U.S. military was built on flawed assumptions: that wars would be brief, stockpiles would suffice, and factories could quickly scale up. All three proved false.
Shipbuilding and the Shrinking Fleet
This production crisis is starkest in the Navy. You can't win a Pacific conflict with half a fleet, yet that's essentially what the Navy is facing.
The Navy aims to build 2.3 Virginia-class attack submarines and 1 Columbia-class ballistic missile submarine annually. Currently, they're only delivering 1.13 subs per year—less than half of what's needed [6]. Rear Admiral Rucker testified to Congress that the reasons are straightforward: "workforce challenges, material and supplier delays, and shipbuilder facilities… are driving cost increases and schedule delays" [6].
In response, the Navy has launched 1,200 industrial base projects across 40 states to expand supplier networks and capacity. In 2024 alone, they helped companies recruit or retain over 12,600 skilled workers in shipbuilding trades [8]. This isn't just bureaucratic fluff; it's what ensures submarines get built.
The FY26 budget allocates an additional $2.5 billion for nuclear shipyard and submarine industrial base improvements [4], including drydock expansion, new equipment, and modernization. This won't be a quick fix, but it's essential. Congress has already approved multiyear procurement for up to 13 Virginia-class subs [9], signaling long-term demand to shipyards. It's a step, but far from a complete solution.
Meanwhile, China adds 12 warships to its fleet every year, while the U.S. struggles to deliver submarines on time. Different missions, same core issue: production capacity ultimately limits strategic options.
The Persistent "People Problem"
This capacity gap isn't primarily a money issue. Defense manufacturing isn't short on funds; it's critically short on people.
The average welder at a submarine yard is nearing 60. Software engineers and machinists are drawn to better-paying jobs elsewhere. Defense contractors across the board report thousands of unfilled positions.
The Navy's efforts in 2024 to help industry recruit, train, and retain over 12,600 shipbuilders show real progress [8]. However, the pipeline for skilled workers is still insufficient. The Pentagon's 2023 National Defense Industrial Strategy (NDIS) called for more "upskilling" and apprenticeships [10], but critics at Brookings argue these measures are too vague and small-scale [2]. They've suggested direct incentives, such as debt forgiveness or skilled trades scholarships, to rebuild the workforce [2].
Compounding the issue, the defense sector has consolidated significantly. Since the 1990s, the number of prime defense contractors has plummeted from 51 to just 5 [11]. This means fewer options for the Pentagon and fewer entry points for new talent.
You don't achieve surge capacity from a job fair; you get it from two decades of training people who can cut, weld, design, and debug under immense pressure. This isn't a new problem. After the wars in Iraq and Afghanistan, think tanks warned about the hollowing out of the defense industrial base. Congress held hearings, the Pentagon drafted strategies. Then budgets tightened and priorities shifted. Now, we're scrambling to rebuild what we allowed to atrophy. The crucial difference this time is that China won't wait for us to catch up. If the factories are empty, signing more contracts won't matter.
Why This Matters So Much
Deterrence works only if your adversary believes you can reload. As former Under Secretary Bill LaPlante put it, "hot production lines act as a deterrent" [3]. If you can't replenish what you fire, the enemy will simply wait you out.
The FY 2026 budget, totaling $1.01 trillion with $848 billion for the DOD [4], explicitly prioritizes rebuilding the industrial base. This funding surge follows H.R. 1 from earlier this year, which injected $150 billion in mandatory defense funding from 2025–2028 [12]. This bill poured money into naval shipyards, missile production, and the industrial base fund [12]. Specifically, shipbuilding received $29 billion (including subs and destroyers); munitions and defense innovation got $25 billion; and $3.3 billion for industrial base grants along with $5 billion for critical minerals supply came directly from H.R. 1 [12].
This financial infusion is making a difference: monthly 155mm shell production has doubled [4]. We launched 1,200 new shipyard projects [8]. We funded DPA Title III investments—restarting high-purity aluminum and rocket motor production [3].
However, money without people and flexibility is just noise. We desperately need skilled workers—machinists, welders, engineers—and we need them fast. While the new funding helps, it doesn't solve the training bottleneck. We need clear apprenticeship programs, debt relief for trade school graduates, and military recruitment pipelines that mirror the investment in hardware.
The defense sector often can't compete with the wages offered by tech or oil and gas industries. Therefore, it must compete on mission, stability, and career pathways. This means offering genuine apprenticeships, not just PowerPoints, and making defense work as attractive as it is essential.
We also need more slack in the system. Many current build-up efforts are operating at maximum capacity [4]. While this might fulfill immediate orders, it won't handle a second front. We're building without backup. What happens if another war breaks out next year, or the year after?
Congress is discussing a National Munitions Production Act to mandate domestic production levels. Some advocate for an updated "Arsenal of Democracy" posture [10]: industrial readiness as a strategic imperative. These aren't overreactions; they've seen the lead times.
The U.S. isn't short on defense innovation; it's short on endurance.
Conclusion
You don't win wars with good intentions; you win them with functioning factories.
The defense budget is finally moving in the right direction, with significant new funding. But budgets don't weld, they don't cast, and they don't train. The U.S. military has operated on assumptions—that stockpiles are deep, that production can surge with just funding, and that workers will appear when needed—that haven't been true for decades. Our rivals are well aware of these vulnerabilities.
We're starting to mobilize. But if this reindustrialization effort falters into just another procurement cycle—if it stops at line items instead of building actual production lines—we'll end up right back where we started: outgunned, not by enemy weapons, but by our own lack of capacity.
Success will look like:
FY27 budget requests that significantly increase industrial base funding.
Shipyard hiring efforts that result in sustained employment beyond the first year.
Supply chain investments that create true redundancy, not just short-term efficiency.
A defense workforce that grows faster than its experienced members retire.
Keep an eye on the FY27 request to see if the Defense Industrial Base line items continue to grow. Track how many shipyard hires actually stay employed by Q2 next year. And if you're involved in building, start thinking in terms of buffers, not just baselines. That's how a builder thinks in a world that's rapidly rearming.
Citations
[1] U.S. Government Accountability Office. (2023). Supply Chain Resilience: DoD Needs to Take Additional Actions to Address Material Shortfalls. [https://www.gao.gov/products/gao-24-10695]
[2] Brookings. (n.d.). Strengthening America’s Defense Industrial Base. [https://www.brookings.edu/articles/strengthening-americas-defense-industrial-base/#:~:text=providing%2024%20of%20these%20commodities]
[3] U.S. Department of Defense. (2023, June 16). DOD Enters Agreement to Expand Domestic Manufacturing to Strengthen U.S. Missiles. [https://www.defense.gov/News/Releases/Release/Article/3431173/dod-enters-agreement-to-expand-domestic-manufacturing-to-strengthen-us-missiles/]
[4] U.S. Department of Defense. (2024, May 25). Background Briefing on FY 2026 Defense Budget. [https://www.defense.gov/News/Transcripts/Transcript/Article/4228828/background-briefing-on-fy-2026-defense-budget/]
[5] Congressional Research Service. (n.d.). Defense Acquisition: Multiyear Procurement (MYP) Authority. [https://www.congress.gov/crs-product/R48182]
[6] U.S. Government Accountability Office. (2024). Navy Shipbuilding: Actions Needed to Address Workforce and Supplier Challenges. [https://www.gao.gov/products/gao-24-106649]
[7] Congressional Research Service. (n.d.). The U.S. Defense Industrial Base: Background and Issues for Congress. [https://sgp.fas.org/crs/natsec/R47751.pdf]
[8] U.S. Department of Defense. (2024, April 12). Supply Chain, Workforce, Advanced Manufacturing Will Help Navy Get Ships Faster. [https://www.defense.gov/News/News-Stories/Article/Article/4150403/supply-chain-workforce-advanced-manufacturing-will-help-navy-get-ships-faster/]
[9] U.S. Department of Defense. (2023, December 20). Congress Passes Fiscal 2024 Defense Spending Bill, Pay Raise for Service Members. [https://www.defense.gov/News/News-Stories/Article/article/3618367/congress-passes-fiscal-2024-defense-spending-bill-pay-raise-for-service-members/#:~:text=The%20FY24%20NDAA%20also%20authorizes,the%20manufacture%20of%20rechargeable%20batteries]
[10] U.S. Department of Defense. (2023, January 23). National Defense Industrial Strategy. [https://www.businessdefense.gov/NDIS.html]
[11] The Heritage Foundation. (n.d.). A Strategy to Revitalize the Defense Industrial Base for the 21st Century. [https://www.heritage.org/defense/report/strategy-revitalize-the-defense-industrial-base-the-21st-century]
[12] U.S. Congress. (n.d.). H.R. 1. [https://www.congress.gov/bill/119th-congress/house-bill/1/text]
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