From shortages to strength: New plan to boost US defence manufacturing

Hill features in a new article that as global tensions rise, America’s defence factories are struggling to keep pace — with critical shortages and slow production threatening national security. But a bold plan of targeted reforms could revive the defence industrial base, ensuring the US is ready to face 21st-century challenges head-on.

A recent report from the Heritage Foundation highlights how decades of poor policy decisions have resulted in underinvestment, regulatory hurdles, workforce mismatches, and market distortions—factors that have collectively weakened the readiness of the defense industrial base.

Experts argue that without fundamental structural reforms, the defense sector cannot achieve sustainable improvement. Key recommendations include strategic grantmaking, procurement reform, workforce development, regulatory streamlining, and tax policy adjustments.

One proposed solution is output-based grants that incentivize long-term industrial investment. Because the defense sector serves only one customer—the federal government—and faces unpredictable annual funding, manufacturers lack motivation to expand capacity. By providing grants that cover the gap between desired production and actual orders, such as funding the costs of an unpurchased submarine to maintain capacity, the Department of Defense can stabilize demand and preserve surge readiness.

Additionally, shifting from cost-plus to fixed-price contracts would encourage efficiency and innovation, aligning defense procurement more closely with private-sector market principles.

Regulatory reforms are also needed to address lengthy permitting delays caused by laws like the National Environmental Policy Act. Streamlining approvals and designating a lead agency could accelerate facility expansions without compromising safety or environmental standards.

Workforce shortages must be tackled through state-level education reforms linking funding to graduates’ earnings, encouraging programs that align with industry needs.

Finally, tax reform allowing immediate expensing of equipment and R&D costs would remove market distortions and boost manufacturing competitiveness.

By implementing these five reforms, the US can rebuild its defence industrial base, strengthen national security, and foster a new era of economic prosperity driven by innovation and a skilled workforce.

By Naila Huseynova