The ‘Shrinking’ Defense Industrial Base
FIGURE 1. UNIQUE RECIPIENT UEI AND DOD OBLIGATIONS, FY 2015–2022
60,000 70,000 80,000 50,000 40,000 30,000
$600
$500
$400
$300
$200
20,000
$100
10,000
$0
0
FY15 FY16 FY17 FY18
DoD Obigations (Billions of 2023 Constant Dollars) FY19 FY20 FY21
FY22
Unique Prime Contractors
Note. UEI = Unique Entity Identifier.
DoD leadership has taken some action to address the decline of the DIB, especially with respect to attracting new contractors (i.e., entrants). For example, DoD has called for strengthening small business engagement and support through its Small Business Strategy and for increasing the number of new suppliers doing business with DoD as part of its National Defense Industrial Strategy (DoD, 2022). However, while increasing the number of entrants is an admirable strategy for mitigating a declining DIB, it does not address the important issue of why existing contractors are exiting the DIB. Additionally, the issues of (lower) entrant rates and (higher) exit rates are likely to be at least somewhat distinct, even though they both contribute to a shrinking DIB. In short, DoD likely cannot halt the DIB’s continued decline without a better understanding of the retention side of the issue. The decline of DoD prime contractors is widely reported, but accompanying the decline is surprisingly limited research investigating exactly why certain contractors are leaving. Most research to-date relied on secondary data to describe overall trends, or worse, anecdotal stories and mostly negative rhetoric based on hearsay or individual experience. While DoD may conduct occasional exit interviews with contractors upon the completion of contracts, the authors have no knowledge of any large-scale, systematic study of former contractors. Therefore, hearing directly from contractors that left the DIB would go far to fill a critical gap in quantifying their concerns and understanding the phenomenon from their perspective. This knowledge would also be essential in that DoD
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Defense ARJ, Summer 2025, Vol. 32 No. 2: 194—223
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