First 'Vital Signs' report shows highs and lows of defense industrial base


ARLINGTON, VA -- In a worrying trend, the defense industrial base that supplies information security, weapons and services to the military is declining, according to a unique data-driven new report issued Feb. 5.

The defense industrial base (DIB) earned a less-than-stellar “C” grade in “Vital Signs 2020: The Health and Readiness of the Defense Industrial Base,” compiled by the National Defense Industrial Association (NDIA) and its partner, the data analytics firm Govini, in what is expected to be an annual report.

NDIA and Govini analyzed, over a three-year running average, 44 longitudinal statistical indicators such as surge capacity and threats to digital systems. Each of the 44 indicators was graded from 0 (bad) to 100 (excellent) and slotted into eight sections, called dimensions, that were then graded individually. The composite grades of the eight dimensions resulted in the defense industrial base’s overall C grade of 77 for 2019. Factoring in 2017 and 2018 data, the overall score is down 2% since 2017.

This first-of-its-kind report paints a concerning picture of an American defense industry challenged – in particular – by cyber threats. Moreover, it grades poorly the availability of  a skilled, diversified workforce needed to produce advanced warfighting capabilities. Following the Cold War, the peace dividend, and many years of focus on counterinsurgency, the U.S. finds itself challenged to maintain supremacy in renewed great power competition.

“Vital Signs 2020 does report bright spots. Competition among contractors and demand for goods and services remain strong. The high level of capital expenditures, the overall low level of market concentration and the relative paucity of total contract award dollars paid to foreign contractors were factors. Very strong foreign military sales (FMS) of aircraft, ships and land vehicles were also encouraging.

Grading the Eight Dimensions, from lowest to highest

  • Industrial Security earned a failing 63 grade, the lowest among the eight dimensions, as defense contractors endured brazen acts of industrial espionage and data breaches by state and non-state actors in recent years.
  • Production Inputs barely earned a C grade with a 68 due in part to a defense industry workforce that shrunk from its peak of 3.2 million in the 1980s to about 1.1 million today. The persistent security clearance backlog was another contributing factor, especially with stagnating approvals for top secret clearances.
  • Supply Chain dynamics such as the frequency of contract terminations, financial performance, inventory schedule, and cost management contributed to the score of this dimension plummeting from 83 to 68 since 2017.
  • Innovation conditions earned a low grade of 74 because of the declining investment in scientific and basic research and development, the lack of international competitiveness and the steep drop in patent applications. 
  • Productive Capacity and Surge Readiness is a bright spot in the overall health of the DIB, even with room for improvement. The report indicates the United States can meet a peacetime demand surge as there are fewer shortages in critical defense supplier industries. However, the dimension still earns only a 77 in the report.
  • Political and Regulatory conditions declined precipitously to a 79 grade – 13 percent in two years – due to a combination of unfavorable congressional defense budgeting process indicators and the lack of congressional interest in major defense acquisition programs. The score of this dimension dropped more than any other. 
  • Demand scored a 94 and was fueled by foreign military sales of logistics management (214% growth), knowledge-based services (143% growth), medical services (121% growth) and of the big-ticket items like aircraft, land vehicles and ships (113% growth). 
  • Competition conditions among the thousands of defense contractors scored a 96, the highest scoring dimension. Profitability, up 3% since 2018 and 7% since 2017, is important as it enables companies to expand business operations and lure new entrants into the market. Market concentration and vanishing suppliers in some important sectors remains a key concern.

 “Make no mistake about it. The United States and China are locked in a war for industrial supremacy unlike any struggle in our history, which necessitated this report,” said retired Air Force Gen. Hawk Carlisle, president and CEO of NDIA. “China is closing the research and development gap the United States narrowly enjoys, so knowing the full measure of the defense industrial base to monitor and counter this rival is paramount for our nation’s continued security.” 

“Measuring the health of the defense industrial base is the first step toward remaining secure as the competition with China is intense,” said retired Air Force Col. Wesley Hallman, NDIA’s senior vice president of strategy and policy.

“This holistic, data-driven analytical approach not only provides a necessary baseline assessment but also begins to point the way forward,” said Tara Murphy Dougherty, Govini’s CEO, of the report.

About NDIA

The National Defense Industrial Association (NDIA) is America's leading defense industry association promoting national security. NDIA provides a legal and ethical forum for the exchange of information between industry and government on national security issues. NDIA and its members foster the development of the most innovative and superior equipment, training, and support for warfighters and first responders through its divisions, local chapters, affiliated associations, and events. For more information, visit