In the 1986 World Cup, Diego Maradona scored his infamous “Hand of God” goal — an obvious handball that went uncalled, because the referee did not have the tools to see it. Today, soccer has addressed that vulnerability with sensors and video review, ensuring the game is adjudicated fairly. U.S. Defense industrial policy faces a similar challenge. In America’s defense industrial base, the issue is not a lack of oversight, but distorted incentives that steer work toward private vendors even when the organic industrial base is well-positioned to perform it. When the organic industrial base is deprived of work, it loses capacity, erodes readiness, and increases long-term costs to national security.
Defense contractors routinely benefit from federal tax incentives designed to encourage domestic production, yet these incentives often flow to large private firms rather than to government-owned arsenals and shipyards. A 2023 Government Accountability Office report found that tax preferences for defense manufacturing disproportionately advantage corporations with extensive lobbying operations, while organic facilities — such as those operated by the Army, Navy, and Air Force — receive fewer direct benefits despite their strategic importance in sustaining surge production during conflict.
The organic industrial base includes facilities like the Anniston Army Depot, which repairs and upgrades armored vehicles; the Tobyhanna Army Depot, which maintains communications and electronics systems; and the Norfolk Naval Shipyard, which conducts overhauls on nuclear-powered submarines. These sites employ tens of thousands of civilian workers and possess unique expertise in maintaining legacy systems that private contractors often avoid due to low profit margins.
Despite this capacity, recent contract data shows a persistent shift of sustainment work to the private sector. In fiscal year 2022, the Department of Defense obligated over $100 billion to private contractors for logistics and maintenance, compared to approximately $25 billion allocated to organic facilities — a four-to-one ratio that has remained relatively stable over the past decade, according to analysis by the Congressional Budget Office.
Defense officials acknowledge the imbalance. In testimony before the Senate Armed Services Committee in March 2024, the Under Secretary of Defense for Acquisition and Sustainment stated that “we must recapitalize our organic capabilities not as a fallback, but as a first resort” when core competencies align with mission requirements. However, no new policy directive has been issued to alter incentive structures that currently favor private-sector awards.
Efforts to rebalance the industrial base have emerged in legislative proposals. The National Defense Authorization Act for Fiscal Year 2025 includes provisions requiring the Department of Defense to conduct a biennial assessment of core logistics and maintenance competencies, comparing organic and private-sector performance on cost, schedule, and quality. The bill too mandates a pilot program to restore certain depot-level maintenance workloads to government facilities, with results due to Congress by 2026.
Industry representatives argue that private contractors bring innovation, scalability, and efficiency that government entities cannot match. The Aerospace Industries Association contends that competition drives down costs and accelerates technology adoption, warning that shifting work back to depots without proper funding could undermine readiness.
Meanwhile, labor unions representing civilian defense workers have urged Congress to strengthen Buy American provisions and expand workforce development programs tied to organic facilities. The International Association of Machinists and Aerospace Workers highlighted in a 2023 resolution that depot closures over the past two decades have eliminated skilled trades pipelines in communities from Pennsylvania to California, creating geographic gaps in surge capacity.
The Department of Defense has not announced any changes to its current allocation strategy for sustainment contracts. A spokesperson confirmed that the department continues to evaluate workload distribution based on “best value” determinations, though the criteria used in those assessments are not publicly detailed in routine reporting.
