“Production Is Deterrence”

Ultimately, the state of the industrial base will make or break whether the United States can produce enough weapons to realize the NDS. The war in Ukraine has shed light on serious deficiencies in the United States’ ability to quickly surge production of key weapons. To bolster industry, the DoD is pursuing the multiyear procurement (MYP) and large lot procurement (LLP) programs for several key PGMs. These programs will yield cost savings, but their primary benefit is strategic. MYP and LLP will strengthen the industrial base, providing industry with the stability it needs to expand production capacity. A healthy missiles-and-munitions industrial base enables the United States to counter Russia and will be a powerful deterrent to China.

Despite the progress that the FY24 budget makes in realizing the NDS by filling in critical gaps in the PGM portfolio, there remain significant shortfalls in stockpile depth and in industrial capacity. The DoD’s inventory of key PGMs, especially standoff weapons, maritime strike PGMs, and air defense interceptors remains too small to blunt an initial invasion, let alone prevail in a protracted conflict against China. It will take years to rebuild American stocks to pre-2022 levels for some of the PGMs given to Ukraine. Moreover, there is a risk that these plans do not come to fruition because of service or congressional pushback against the MYP and LLP programs. More can and should be done to address these deficiencies.

For the DoD, the authors make the following recommendations:

• Make key conventional PGMs a separate reporting category and create a process that ensures a joint perspective is taken on key PGMs in each budget cycle.
• Continue to buy long-range weapons, but also develop more medium-range weapons for the pacing threat. The DoD must seek an affordable mix appropriate for different U.S. delivery platforms.
• Continue to invest in maritime strike from all domains. The Air Force should follow through on projected buys of the Long-Range Anti-Ship Missile (LRASM) and Joint Strike Missile (JSM). The Army and Marine Corps should accelerate development and procurement of weapons such as the Maritime Strike Tomahawk (MST), the SM-6, and the long-range Land-Based Anti-Ship Missile (LBASM) that increase their ability to project power in the Pacific. Likewise, the Navy should continue to buy the Mk-48 heavyweight torpedo as well as SM-6 multirole missiles.
• Continue to invest in an integrated and layered system of air defenses that includes a high-low mix that can be purchased in quantities sufficient to counter the Chinese threat. Specifically, the Army needs more of the affordable interceptors intended for air and cruise missile defense.
• Embrace MYP for key conventional PGMs to provide a consistent demand signal to industry.

For Congress, the authors make the following recommendations:

• Mandate that the DoD provides a report on key conventional PGM procurement annually and an assessment of its progress toward its stockpile requirements.
• Continue to provide supplemental appropriations to support key weapons that will be needed for Ukraine and other allies and partners, which the NDS says are a center of gravity.
• Appropriate funds for the proposed MYP and LLP programs.
• Consider making MYP for munitions a normal authority, expanding its use, and appropriating funds for these efforts.

Introduction

The war in Ukraine has reminded the world that large-scale conflicts consume enormous amounts of military equipment, especially ammunition, and has revealed weaknesses in the U.S. defense industry. As both Russia and Ukraine have relied increasingly on barrages of artillery fire and precision long-range strikes, the war has settled into a prolonged war of attrition. At peak intensity, the Ukrainians fired on average 4,000–7,000 artillery shells a day,¹ while the Russians more than tripled this number by launching massive bombardments of up to 20,000–30,000 shells daily.² Ammunition shortfalls have plagued both sides. Russian forces are rationing their artillery fire, using 75 percent less than their previous highs, which has hampered their 2023 offensive.³ American training for Ukrainian forces has begun to emphasize how to conserve ammunition by employing fires more judiciously to enable maneuver.⁴

In addition to large salvos of unguided artillery, both sides have used precision-guided weapons to strike targets deep behind the front lines. Three months into the war, Russia had fired more than 2,100 cruise and ballistic missiles into Ukraine, consuming a large part of its inventory of advanced weapons.⁵ Around the same time, the United States provided Ukraine with the High Mobility Artillery Rocket System (HIMARS) and long-range rockets, which Ukrainian forces effectively used to strike Russian ammunition depots and headquarters.⁶

As both combatants have depleted their stockpiles over time, they have had to adapt their tactics and acquire alternate weapons. According to one assessment, during the first 11 months of the war, Russia had fired more than 5,000 missiles and drones.⁷ After Russia expended many of its most advanced ballistic and cruise missiles,⁸ it increasingly relied on older weapons,⁹ used missiles in nontraditional roles (such as air defense interceptors for ground attack),¹⁰ and fired cheap Iranian loitering munitions to terrorize Ukrainian cities.¹¹ To meet the Ukrainians’ repeated demand for longer-range fires, in February 2023 the United States announced it would provide Ukraine with Ground-Launched Small Diameter Bombs (GLSDBs).¹² GLSDBs were an upgrade for Ukraine, with nearly double the range of the Guided Multiple Launch Rocket System (GMLRS) rounds previously provided.¹³ In part, Washington decided to procure GLSDBs for Ukraine because it could not manufacture GMLRS fast enough, and it was not willing to dip into its stockpile of Army Tactical Missile System (ATACMS).¹⁴ The GLSDB production line also had excess capacity and allowed the Department of Defense (DoD) to tap into its plentiful stockpiles of M26 rocket motors and Small Diameter Bombs (SDB).¹⁵ Since building more rocket motors has posed a challenge, utilizing existing stores of weapons and repurposing the M26 proved to be an expedient option for quickly getting additional long-range fires to Ukraine.¹⁶ Similarly, since the end of the wars in the Middle East, the DoD has reduced its requirement for Joint Direct Attack Munitions (JDAMs)—the tail kits that transform dumb bombs into smart GPS-guided weapons. Unsurprisingly, the DoD added JDAMs to a security assistance package for the Ukrainian air force.¹⁷

Ukrainian forces have sought workarounds and alternate weapons in part because the U.S. defense industrial base has been unable to produce enough of the most in-demand weapons at the necessary pace. Political issues have also played a role, but, regardless, manufacturing capacity is a limiting factor with no quick solution. During the unipolar era when the United States faced no peer competitors, it scaled back weapons production and optimized for efficiency, leaving a consolidated missiles and munitions industry that today relies on complicated and fragile supply chains.¹⁸ In “Precision and Posture,” a 2022 CNAS report, the authors explored how the Pentagon exacerbates this problem with volatile and inconsistent munitions buys that fail to provide industry with a regular demand signal.¹⁹ As a result of these trends, the United States cannot quickly produce more weapons when needed. Supply chain issues have created bottlenecks that inhibit rapid acquisition of key components and materials, especially rocket motors, microelectronics, and energetics. To surge production, industry not only must overcome supply chain issues but also open new production lines, which requires additional machine tooling and an expanded workforce. Putting these pieces in place typically takes several years and requires substantial investment. Many defense companies are unwilling to take these steps without contracts in place to assure predictable demand. This is not simply an American problem; the European defense industrial base is in an even worse state and continues to be reliant on the United States.²⁰

American defense companies are trying to meet the continuing demand from Ukraine, while also rebuilding U.S. and allied stocks that have been drawn down. This is in addition to building stores of the weapons that would be needed for a war against China, which the 2022 National Defense Strategy (NDS) identifies as the United States’ “pacing challenge.”²¹ Many of the precision-guided munitions (PGMs) needed to strengthen deterrence against China differ from those that Ukraine and other allies and partners need. The DoD must meet both important requirements simultaneously—arming European allies and partners while also procuring the right weapons for the Indo-Pacific. The president’s fiscal year (FY) 2024 budget request claims to address these problems by allocating $30.6 billion to a category it calls “missiles and munitions” and maximizing munitions orders “that are most relevant for deterring and, if necessary, prevailing over aggression in the Indo-Pacific.”²² Deputy Secretary of Defense Kathleen Hicks added that the Pentagon is “buying to the limits of the industrial base even as we are expanding those limits.”²³

The following analysis of the FY24 budget request assesses the Biden administration’s claims and answers the following questions: Are planned buys of key types of weapons, especially the antiship capabilities needed for the Indo-Pacific and the air defenses required for both theaters, sufficient? Can the DoD continue to arm Ukraine and rebuild U.S. stockpiles while arming for the China challenge? Has the DoD taken sufficient steps, including the use of multiyear procurement (MYP) contracts and large lot procurement (LLP), to strengthen industry?

To answer these questions, the authors build on last year’s analysis of PGM procurement, which assessed spending on a select portfolio of “key conventional PGMs.” This year’s report expands the key conventional PGM portfolio to include surface-to-air missiles and torpedoes to examine whether buys are sufficient to meet the steady state demand for air defense around the globe and the demands of future possible warfighting missions in the Indo-Pacific, such as sinking ships. Compiling DoD spending on this tailored list of critical PGMs provides a clearer picture of current joint conventional weapons capability and the ability to meet the projected warfighting demands.

The FY24 presidential budget request builds on the shift that began in FY23 to support warfighting requirements for China—the NDS’s priority challenge—by increasing buys of key long-range and antiship missiles and beginning to build out the high-low mix of interceptors that are needed to create a layered system of air defenses. Nevertheless, current inventories of standoff weapons, maritime strike PGMs, and air defense interceptors remain far too small to blunt an initial Chinese invasion, let alone prevail in a protracted war. Largely through supplemental appropriations, the DoD is also making moderate progress in rebuilding its inventory of the seven PGMs given to Ukraine and expanding U.S. production capacity to meet the current and future demand from the United States and allies and partners. The DoD must continue to develop the PGMs that it needs to counter China, while expanding the production of existing weapons to counter Russia and refill U.S. stockpiles. It can achieve both of these objectives because, except for air defense weapons, the PGMs needed for a war in the Indo–Pacific and those needed currently in Europe differ. Finally, the Pentagon has trial MYP and LLP programs for PGMs, but the services and Congress need to embrace these initiatives, even though they limit their budgetary flexibility, to create a stable demand signal for industry. The primary benefit of MYP is strategic, not economic—it will help create a healthy missiles-and-munitions industrial base that can meet the current demand and surge when needed. Thus, Congress needs to appropriate funds for these pilot programs and support their expansion.