Executive Summary

The Office of the Assistant Secretary of Defense for Industrial Base Policy (OASD IBP) asked CNA to develop a wargame to explore opportunities to strengthen, improve, and expand the US defense industrial base (DIB). In response, CNA conducted the Arsenal of Policy series from November 2024 to January 2025. It consisted of two facilitated workshops and a culminating wargame that brought together government and industry representatives to discuss opportunities and build a shared understanding. Recognizing the multitude of recommendations on how to address identified weaknesses in the DIB, the Arsenal of Policy series focused on exploring and assessing existing recommendations.

Four recommendations were selected from a larger list compiled in support of this effort. Those recommendations are “integrate policies and mechanisms to expand the domestic DIB through strengthening and advocating for incentives for small businesses, new DIB entrants, and nontraditional vendors” (expanding the DIB), “invest in the Organic Industrial Base’s (OIB’s) facilities, staffing, and systems” (OIB), “develop intellectual property (IP) licensing and control policies to…promote the effective integration of multiple suppliers’ intellectual properties and infrastructures” (IP), and “strengthen detection and enforcement against adversarial ownership, influence, and intelligence gathering” (adversarial capital). The series sought to identify viable implementation actions, benefits, and trade-offs, as well as potential second-order effects, of these four recommendations.

The series refined these broad recommendations into more specific policies linked to DIB challenges, incorporating stakeholders’ perspectives on the likely impacts of those refined policies at each stage. The intermediate workshops (one with government, one with industry) built an internally coherent set of policies by linking underlying challenges to targeted policy actions aimed at distinct stakeholders for each of the four selected recommendations. The culminating wargame identified the anticipated impacts of these developed policies and plotted the policies, as well as any necessary supporting actions, onto a timeline.

Key Insights

Although the wargame was scoped to munitions supply chains and many examples in this report are specific to munitions, most of the findings are applicable across the DIB.

• Expanding the capacity of the munitions industrial base may require a series of policy changes and government actions. Because of the scale and the complexity of the challenges facing the DIB, the four policy recommendations explored in this wargame
  (implemented either alone or in concert) are not complete solutions that will solve the problem of industrial base capacity or capability.
• The policy changes that may have the largest effect are actions that provide amore consistent demand signal and increase or ensure access to raw materials. Participants returned to these two challenges repeatedly during the series. These are also some of the changes that will be the most challenging for government to implement. In the absence of a stable demand signal, industry stakeholders felt consistent communication between the public and private sectors could provide the information and stability industry needs to begin investments and expansions necessary to meet munitions requirements during war or high-intensity combat.
• Participants agreed that the policies developed and identified throughout the series could improve communication, remove bottlenecks, and accelerate processes. Most of the policy actions identified are implementable in the short term and, therefore, can provide benefits in the short term as well. These policy actions are detailed in the Recommendations and Potential Actions section.
• Identifying priority policy actions across the diverse group of stakeholders was challenging. However, both government and industry participants agreed that IP policy changes could be deprioritized. Industry also believed that adversarial capital could be deprioritized, although government attendees disagreed.
• There are existing programs taking a novel approach to challenges facing the DIB that could be used as pilots or models for future DIB-wide efforts. They include creative acquisition practices at the Air Force, the Navy’s Accelerated Training in Defense Manufacturing program, and the Navy’s “Build Submarines” advertising initiative.
• Increased outreach and education is necessary for subtier suppliers and raw materials providers that are already a part of the DIB, as well as nontraditional vendors and small businesses that could help expand the DIB. Defense prime contractors (companies that have a direct contract with the Department of Defense (DOD), also known as “primes”) are generally in close communication with the US government. Although primes are familiar with the risks of investment by adversaries, the certification process for new production lines, and the grants and funding opportunities available to defense firms, other firms and vendors may not be.
• Multiple government offices or agencies are duplicating certain tasks. The Department of Treasury, Department of Commerce, and intelligence agencies collectvery similar, if not identical, information on firms’ funders and adversarial investment. Firms often must be certified multiple times for the same parts across different government buyers. This duplication wastes both government’s and industry’s limited resources.
• The hundreds of recommendations on how to strengthen the DIB make prioritization a challenge. CNA developed a method to narrow the recommendations and to evaluate them via the series that could be replicated with a different list of recommendations or a different scenario and focus.

Recommendations

Discussions during the series made it apparent that the DIB faces many challenges producing munitions in the amounts and within the timelines required, inhibiting readiness and deterrence. However, participants were able to identify and prioritize clear, actionable steps that will help position the DIB to increase munitions materiel capacity and capability. To support the DIB, OASD IBP should consider implementing the following feasible and risk-informed policy and resource options developed from postgame analysis:

• To expand the DIB and increase the number of firms that can produce key munitions, DOD should consider increasing communication about opportunities and grants to firms further down the supply chain and to new suppliers, as well as increasing education on requirements and the certification processes. DOD should also consider expanding the number of vendors that primes can mentor to support these communication goals.
• To remove delays that can result in the loss of promising applicants and to expedite hiring authorities if a production surge is required, DOD should consider requesting that the Office of Personnel Management (OPM) publish an updated Direct Hiring Authority memo for OIB positions. This memo should identify priority areas for hiring and outline an implementation plan for how current gaps will be filled.
• To expand the small applicant pool for OIB positions, DOD should study past recruitment efforts and increase marketing and education efforts to the general population about the importance of OIB careers.
• To ensure that DIB supply chains are resilient to adversarial influence, DOD could benefit from encouraging the intelligence community to add assessments on aggregate risk into existing assessments on adversarial capital.