Pete Hegseth issues warning to major US defence contractors

Unlock the White House Watch newsletter for free

Your guide to what Trump’s second term means for Washington, business and the world

US defence secretary Pete Hegseth demanded that major defence contractors speed up weapons development and production or “fade away”, as he declared a new era of procurement competition.

In a speech on acquisition reform on Friday, Hegseth also called for unprecedented private investment in the defence industry and announced the formation of a specialised “deal team” to bolster the Pentagon’s weapons purchases.

As the secretary detailed plans for the Pentagon to speed up its notoriously slow and expensive acquisition process, he invited new companies to compete against defence heavyweights such as Lockheed Martin, RTX, Northrop Grumman, Boeing and General Dynamics.

“These large defence [groups] need to change the focus on speed and volume and invest their own capital to get there . . . if they do not, those big ones will fade away,” he told industry executives at the National War College in Washington.

He also called on the large aerospace and defence companies to invest more of their own capital instead of “saddling taxpayers with every cost”.

The Pentagon’s changes, which include slashing contract requirements and regulations, “will move us from the current prime contractor-dominated system [which is] defined by limited competition”.

Hegseth, quoting a speech by former defence secretary Donald Rumsfeld, went on to declare the Pentagon’s bureaucracy an “adversary”.

Consolidation due to post-cold war Pentagon budget cuts shrunk the pool of contractors from 51 in 1990 to the five companies that dominate the production of the US military’s weapons and other technologies.

The secretary said that with his changes he is hoping to unleash “unprecedented private sector investment in defence production capacity” by stabilising the Pentagon’s so-called demand signal, or commitment to purchase certain systems over time.

The new “deal team”, which would be part of a recently established acquisition unit known as the Wartime Production Unit, would be “empowered to forging [sic] groundbreaking business deals that revolutionise production capacity and completely overhaul contract execution”.

Hegseth also said that to make it easier for companies to place bids, the Pentagon would take on more “acquisition risk” so that no bid would be considered non-compliant. The defence department would also slash regulations, including certain reporting requirements, accounting standards, excessive testing requirements, oversight and excessive study and analysis requirements.

“This is the beginning of an unrelenting onslaught to change the way we do business and to change the way the bureaucracy responds,” he said.

Josh Kirshner, managing director at Beacon Global Strategies, said Hegseth’s speech reflected long-held concerns of both traditional players and defence start-ups, and echoed what the Pentagon has been telling the companies in recent months.

“I think longtime defence companies and ones new to the Pentagon agree with many of the frustrations the secretary laid out,” he said. “They’re just as eager and invested in seeing the department move more quickly.”

But Kirshner warned that the changes would take time.

“The challenges in implementing this will be far-reaching and significant, likely taking far longer than leadership expects.”