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How DoW Defense Industrial Base (DIB) expansion impacts Houston

By Bart Taylor, GHMA

Much has been made in recent years about the hollowing out of America’s defense industrial base. By some estimates, over 15,000 suppliers have been lost from defense-related supply chains.  

Today, energizing the industrial base is a stated priority of the rebranded Department of War. The DoW has launched a series of initiatives to expand and modernize the “DIB”, with newly created or renamed entities like the Office of Industrial Base Growth, The Civil Reserve Manufacturing Network, a Warfighting Investments, Resourcing, and Execution (WIRE) office that operates under Industrial Base Resilience (IBR), and a new National Manufacturing Registry where companies can list and be identified as potential suppliers. There's a lot more. It’s a labyrinth of acronyms and programs. 

It’s all intended to unlock a bureaucracy that itself has become a barrier to participation. 

I reached out to Bret Boyd, CEO of Sustainment, to better understand how we got here and how this new approach might reverse years of industrial base contraction. Sustainment helps defense-related OEMs and others “discover suppliers, coordinate sourcing and procurement,” and more. 

“There was an event they now call the ‘Last Supper’ in the Clinton administration," Boyd recounts, "where they brought all of the prime contractors together and said, ‘hey, we're gonna cut the defense budget down significantly, and that means we're not going be able to feed all you guys, and you all need to merge. Coming out of that (meeting) is how we ended up with the five primes. There were about 50 beforehand," he says. 

Today we know the five major defense contractors as Lockheed Martin, RTX Corporation (formerly Raytheon), Northrop Grumman, General Dynamics, and Boeing. 

It follows that the move to fewer primes led to fewer subcontractors operating in the defense supply chain – a legacy that persists today. Boyd says one goal of the new regime is to reverse the trend.

“There is a really deliberate movement to build beyond that. I don't know if it's back to 50, or it's the next 20 or whatever, but there's a whole range of funding vehicles and initiatives to find the next generation of defense contractors — what they’re calling neo-primes,” he says.

“And one of the reasons that I think this is relevant to the state of Texas and to the Houston area in particular, is that one of the clear winners in this is Saronic,” Boyd says. “Saronic is building out heavily in Texas — they say it will be the biggest shipyard in the United States when it's done. And that's pretty interesting, right? That's a business that I think has raised $5 billion in a recent round and is investing in infrastructure that results in both jobs and opportunities for the whole contract manufacturing supply chain in the region.”

Count Houston-area newcomer Davie Defense as a possible neo-prime, and “another 10-20 companies that are interesting and getting big contracts”, per Boyd, and the DoW’s vision for an industrial base operating on war-time footing seems off to a fast start. The sloganeering isn’t lacking, from "Arsenal of Freedom” to the “Build Freedom Summit” slated for October 21-23 in Galveston — all of which paints a picture of a WW II-inspired ecosystem where even the smallest supplier is connected to defense-related opportunities when the need arises. A new National Manufacturing Registry is contemplated to tap available expertise and capacity at a moment’s notice. 

But what’s less clear is how financial resources (contemplated through a new Office of Strategic Capital) and other resources will flow through the newly expanded network of neo-primes to reach subcontractors and contract manufacturers that in the end are no less critical. And who may or may not be otherwise qualified to take on DoW work.

Planners seem aware of the challenge – and the reality that Defense has been its own worst enemy in recruiting capable small companies into the ecosystem. DoW has acknowledged a "defense acquisition labyrinth" that “drove a 48% decline in small business suppliers", in part by providing regulatory relief including the suspension of CMMC Phase II cybersecurity compliance requirements. A new program managed by the Defense Innovation Unit (DIU) creates a “fast-track pathway designed specifically to scale commercial software, AI, and dual-use tech directly into formal military systems without years of red tape.” There’s more – a lot more. The DoW is at least aware of its reputation, and the fact that thousands of small suppliers decided a long time ago that defense work wasn’t worth the trouble.  

There are warts. Some programming feels 10 years late to the party. And DoW seems intent on duplicating otherwise worthy private-sector efforts. Manufacturers will be asked to create and maintain yet another digital listing, this time in Lynxconnect.io, the new portal that will serve as a gateway to the National Manufacturing Registry. It’s information that suppliers have offered up and that may already reside with Boyd’s Sustainment, or others like Connex Marketplace, Thomas, Mfg.com – and more. 

So where does this leave Houston? On one hand, in an enviable position: its manufacturing assets are second to no other US outpost. If the DoW is serious about a national engagement, Houston will be an epicenter of defense industrial base growth.

That said, its rich supplier base must collectively pivot to what the DoW is describing as “high-attrition sub-sectors” that will attract a lion’s share of funding – like “drone and kinetic systems, munitions replenishment, critical hardware components,” in addition to “maritime and naval base development” where the Gulf Coast already leads.  

It’s incumbent on local companies to upskill the workforce and uptool operations to meet the opportunity. 

Bart Taylor is president of the Greater Houston Manufacturers Association. Reach him at [email protected].

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