As part of President Biden’s whole-of-government approach to promoting competition, the Department of Defense (DoD) released a new report today on the state of competition in the defense industrial base. The report surveys the state of competition across key defense sectors and finds that extreme consolidation poses risks to our nation’s national and economic security. The report emphasizes that promoting competition is a top priority for DoD and outlines a series of actions that DoD will pursue to rebuild its competitive bench, lower costs for taxpayers, and safeguard our national security. 

The term “defense industrial base” (DIB) describes the vast network of companies that provide goods and services to DoD. These companies make up a significant part of our economy, ranging from small businesses and startups to some of the biggest corporations in the world. They provide products ranging from intercontinental ballistic missiles and highly specialized military satellites to everyday commercial products like batteries and laptops.

The report observes that extreme consolidation in the defense sector has reduced competition and heightened national security risks. Since the 1990s, the number of aerospace and defense prime contractors has shrunk from 51 to just 5. The same pattern has played out across categories of major weapons systems: for example, today, 90% of missiles come from 3 sources. Such consolidation leaves DoD increasingly reliant on a handful of companies for critical defense capabilities. It also hurts taxpayers, as companies no longer feel the competitive pressure to innovate or perform at the highest level to win contracts.

The report also emphasizes the need to rebuild DoD’s competitive bench by lowering barriers for small businesses and bringing in new entrants. Small businesses spur innovation, producing 16.5 times more patents than large firms, and form the next generation of suppliers to support the DoD mission. However, the number of small businesses in the DIB shrunk by over 40% over the past decade. Without action, DoD could lose an additional 15,000 suppliers over the next decade—a national security and economic risk that threatens key domestic capabilities.   

The report outlines five lines of effort to achieve the goals of President Biden’s Executive Order on Promoting Competition in the American Economy, confront the challenges posed by industry consolidation, and ensure sufficient domestic capacity and capability in the defense industrial base:

  • Strengthening Merger Oversight. DoD faces a historically consolidated DIB, making careful attention by DoD in the review of any further mergers necessary. When a merger threatens DoD interests, DoD will support the Federal Trade Commission and Department of Justice in antitrust investigations and recommendations involving the DIB.
  • Addressing Intellectual Property Limitations. Certain practices surrounding intellectual property (IP) and data rights have been used to limit competition in DoD purchasing. In its ongoing modernization of its approach to IP rights, DoD should remain conscious of potential unnecessary anticompetitive consequences of any new IP-related procedures do what it can to create IP-related procedures that do not result in unnecessary anticompetitive consequences.
  • Increasing New Entrants. To counteract the trend of overall shrinking of the DIB, DoD should endeavor to attract new entrants to the defense marketplace by reducing barriers to entry. That includes through small business outreach, support, and use of acquisition authorities that provide DoD the flexibility to reduce barriers and attract new vendors.
  • Increasing Opportunities for Small Businesses. DoD should increase small business participation in defense procurement, including with small disadvantaged businesses, women-owned small businesses, service disabled veteran owned small businesses, and HUBZone businesses, with an emphasis on increasing competition in priority industrial base sectors.
  • Implementing Sector-specific Supply Chain Resilience Plans: DoD should take steps to ensure resilience in the supply chain for five priority sectors: casting and forgings, missiles and munitions, energy storage and batteries, strategic and critical materials, and microelectronics.


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