https://www.dau.edu
Advisers [2016], and Hearn [2024] for summaries of the benefits of competition and the ill effects of undue market power in concentrated industries.) The concept of fair and open competition is embedded in federal acquisition policy and is routinely addressed as a policy concern. For example, in 2021, President Biden signed an executive order titled Promoting Competition in the American Economy, which in part established a White House Competition Council as part of a whole-of- government effort to promote competition in the American economy (Exec. Order No. 14036, 2021). In short, fewer contractors in the supplier base (dubbed a ‘shrinking’ DIB) are likely to have negative implications for the federal budget and taxpayers, as well as create hazards for DoD at a time when U.S. military superiority and innovation is sorely needed. A contraction in the overall size of the DIB has not escaped the attention of the Pentagon. DoD officials are aware of this potential issue and continue to see it as a major concern, as evidenced by comments from current and former Deputy Defense Secretaries:
The contraction of the traditional DIB (both commercial and organic) was a generation-long process and it will require another generation to modernize. (DoD, 2023, p. 9) What you’ve seen mostly in the more recent time is firms—a drop in firms willing to enter the Defense Industrial Base, or firms who are already here leaving…. Why are people not staying, and how do we draw people in? Because that’s the best way to sustain competition. (State of the Defense Industrial Base, 2023, N.P.)
Figure 1 displays the declining number of prime contractors from FY 2015 to FY 2022, set against DoD obligations over the equivalent period. DoD incurred a total reduction of 19,292 prime contractors, with an average year-over-year change of -4.67% (a net average loss of 2,756 prime contractors per year). In contrast to the decline of prime contractors, DoD obligations increased at a compounded rate of 2.71% per year in real dollars over the equivalent period, which means obligations cannot explain the contractor decline. Similarly, the shrinking DIB is sometimes attributed to consolidation in the defense market, primarily via mergers and acquisitions (M&A) (DoD, 2022). However, the amount of yearly M&A activity is simply too low to fully explain the total decline in the contractor base (Schwartz & Johnson, 2023).
197
Defense ARJ, Summer 2025, Vol. 32 No. 2: 194—223
Made with FlippingBook - Online Brochure Maker