Defense industry ‘report card’ finds that U.S. lags on cybersecurity

The vaunted American military-industrial machine is in decline and is quickly losing ground to China, defense leaders said Wednesday in a stunning new self-examination that lays out a host of shortcomings and warns of major ramifications for U.S. national security.

In a first-of-its-kind report card, the National Defense Industrial Association (NDIA) — the leading trade group for American defense contractors — gave the sector a “C,” pointing to troubling trends in the realms of cybersecurity, innovation, the quality of the employee pool, the industry’s supply chain, and a number of other high-stakes areas.

The “Vital Signs” study, which NDIA says will become an annual checkup of the industry’s health and competitiveness, comes at a crucial moment as the Trump administration seeks to pivot its focus toward a long-term, 21st century-defining clash with China in both the military and economic arenas.

President Trump repeatedly touted the strength of the country’s defense base and rising budgets in his State of the Union address the night before the NDIA report came out.

“Our military is completely rebuilt, with its power being unmatched anywhere in the world — and it is not even close,” Mr. Trump declared.

Defense industry leaders acknowledged that the U.S. remains the world’s preeminent military and economic power, but they cautioned that those advantages have been on a steady decline for decades.

“We’ve been moving down this path for the past 30 years, since the end of the Cold War,” said retired Air Force Gen. Herbert “Hawk” J. Carlisle, now the president and CEO of NDIA. “There’s a tendency to say we have the greatest military in the world, … but we won’t stay that way if we don’t address this problem now.”

Gen. Carlisle and other defense sector executives briefed reporters on the study Wednesday and said that many of the industry’s core problems are similar to those faced by the economy as a whole. The ability to attract a highly skilled, qualified workforce, for example, is an issue facing firms in all corners of business, technology and manufacturing.

But the fallout from those problems is particularly acute in the defense industry, with U.S. lives literally hanging in the balance.

The most worrisome area, officials said, is in cybersecurity. The NDIA study gave its companies a failing grade of 63, citing “brazen acts of industrial espionage and data breaches by state and non-state actors” that have plagued leading defense and technology firms. Production input earned a grade of 68 due to the rapid drop in the size of the defense industry workforce — from about 3.2 million workers in the 1980s to about 1.1 million today, officials said, partly due to a backlog of federal security clearances that has made it difficult to fill jobs.

The industry’s supply chain also earned a grade of 68, falling 15 points since 2017, according to NDIA’s scoring metrics.

In some respects, the report card could suggest less of an outright failing of the U.S. defense industry and more of a decline relative to China and other emerging rivals.

Part of the blame, the study said, falls on Congress. NDIA gave the industry a grade of 79 in the political and regulatory category, citing a “combination of unfavorable congressional defense budgeting process indicators and the lack of congressional interest in major defense acquisition programs.”

Still, there were some bright spots. The industry saw a massive increase in foreign weapons and systems sales, a favorite topic of Mr. Trump, leading to a grade of 94 in the demand category. Competition scored a 96, with firms’ profitability rising steadily over the last three years.