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Tuesday, July 23, 2024

The Ukraine War Shows the US Military-Industrial Complex Isn’t Battle Ready

When I spoke to Ekateryna Derkach over a videoconference call on May 25, she looked bleary-eyed. The night before, according to Ukraine’s Air Force, Russian forces had launched 36 Iranian-designed Shahed drones toward key infrastructure and military targets in western regions of the country. In their apartment roughly 15 miles outside Kyiv, roused by the off-and-on whine of air raid alarms through the night, Ekateryna, her husband, Andrey, and her 6 and 12-year-old boys took cover in a hallway corridor and in the bathroom.

Russia’s aerial bombardments of Ukraine’s cities have left people in a state of constant high alert. “We cannot sleep at night, we are all very tired,” says Derkach, a 36-year-old press manager for a US-based IT company with an R&D office in Kyiv. “They start these missiles at 12 o'clock, [or] at three o'clock, when it's really hard.” But thankfully casualties from these attacks are increasingly rare, at least in Kyiv, which sits under a defensive umbrella of anti-aircraft systems, including US-made Patriot missile batteries, which in May were credited with shooting down 13 Kinzhal hypersonic missiles, some of the most sophisticated weapons in Russia’s arsenal.

But that air defense—and other core elements of Ukraine’s war effort—rely on shrinking US and NATO supplies of weapons. In the southeast, the Ukrainian armed forces have begun their long-awaited counteroffensive, expending huge quantities of matériel—laser-guided rockets, artillery shells, howitzer ammunition, and of course, drones, which are in some ways the defining weapon of the conflict. The war’s demands have strained the country’s supply chain and those of US and European allies. Stockpiles of rockets and missiles and the parts needed to build them—from titanium castings, ball bearings, and explosives for ammunition to solid rocket motors, ruggedized microchips, integrated circuits, and optical sensors—are reaching dangerously low levels. The US has already stopped transferring Javelins, the long-range, portable anti-tank missiles pivotal to stopping Russia’s offensive early in the conflict.

“We’re at the point, where, with some things like artillery, if we wanted to give the Ukranians more, we’d have to take them away from some of our units of the National Guard,” says Marc Cancian, a senior adviser at the Center for Strategic and International Studies think tank. “We’re already at the point where [US defense officials] are not comfortable. The question is whether they’re getting even more uncomfortable.”

The war in Ukraine, in short, has exposed the challenges of keeping a modern army supplied in a prolonged conflict, and it has prompted calls for the US to rethink the funding and structure of its military supply chains, which have long relied on a small number of enormous manufacturers, century-old factories, and Cold War–era thinking. The future of the military-industrial complex may be far more decentralized, several military analysts say, with small shops, tech startups, and mom-and-pop manufacturers feeding into the defense base. It is, in many ways, a model that resembles Ukraine’s own defense industry, which has by necessity become a small-scale, hyper-flexible one, with drones and other devices being designed and built, often on the fly, in workshops and garages.

The United States has allocated more than $48 billion in supplemental appropriations for security assistance for Ukraine since the war began in February 2022. On top of that, as reported in The New York Times, the recently approved $858 billion national military budget includes a 55 percent jump in Army funding to buy missiles, a 47 percent increase in the Navy’s weapons purchases, and expanded authorization for the Defense Department to make multiyear spending commitments.

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Typically, this money would be funneled primarily to so-called prime manufacturers, who are attractive to the Defense Logistics Agency, the Defense Department’s procurement arm, because they have existing relationships with suppliers and can provide a one-stop shop for order fulfillment, says Bryan Rudgers, director of government and business development at Jamaica Bearings Group, a New York-based stocking and distribution company licensed to sell parts—seals, gaskets, bearings, motors, gyroscopes—to the US government on behalf of larger aerospace companies like Eaton Corporation and Meggitt.

In the military-industrial food chain, Jamaica Bearings Group is a mid-level player, largely in the inventory and replenishment business. When fighter jets need to get repaired or retooled, with tires, wheel bearings, or other broken systems, it supplies the parts as the “sole source partner” for larger companies, who use them to produce things like hydraulic systems and sensors, which then often feed even larger manufacturers of major weapons platforms, say, F-15s.

Since most munitions being sent to Ukraine from the US are being drawn down from existing stocks, Jamaica Bearings Group is seeing an uptick in order requests. But these orders are haphazard and hard to predict, Rudgers says, making it risky for small manufacturers to hire or invest in new facilities. “They're issuing awards to companies like ours to start replenishing the wares that they have depleted. But they’re trying to do it to fill today’s needs, and not looking at tomorrow's needs,” Rudgers said.

Some factories, like the Scranton Army Ammunition Plant, one of several that produce the US Army’s 155-millimeter artillery rounds, have gone into overdrive, ramping up production of 155-mm artillery shells from 14,000 a month to more than 20,000 a month, with plans to go to 70,000 a month by 2025, Jeff Jurgensen, a spokesperson for the Pentagon, wrote by email.

But sources at smaller production facilities, including a foundry in Montreal, which produces small batches of custom aluminum parts for Javelin missiles, claim the war has had little appreciable effect on their businesses. Though the company is included in a subcontracting deal for the fulfillment of a joint $16.5 million Defense Department Javelin production contract awarded to Lockheed Martin and Raytheon in 2019, taking on new work would be difficult.

“Foundry work is not that easy to get up and running and expand,” as one employee of the company, who spoke on condition of anonymity, says, citing worker shortages as a lingering problem. “You could add a second shift, weekend or overtime work, but to suddenly come into a new multimillion-dollar building … that wouldn’t be done unless there was a huge amount of work.”

The promise of on-time delivery is table stakes in a cutthroat industry in which prime contractors have the power to make or break deals. Training new engineers or technicians, or shifting positions to boost capacity for long-tail orders could threaten the timelines of existing contracts. Plus, a manually intensive “lost wax” casting method, in which molten metal is poured into molds, is done in small batches of a few parts a day and requires exacting dimensional specificity. Unlike at an automotive factory capable of mass production, “every single part has to be individually made,” the employee says.

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A lot of equipment being sent to Ukraine isn’t, strictly speaking, military gear, and is being produced by smaller businesses outside of traditional US and European acquisition channels. MacroFab, a Texas-based cloud manufacturing company linked to a network of roughly 100 factories in the US and Mexico, is “seeing a huge demand for consumer tech, like satellite communications tools and machine vision being adopted for military use,” says CEO Misha Govshteyn. “We don’t always know where products we build go, but our customers tell us privately we know these products are headed for special forces in Ukraine.”

At least a dozen companies have worked with MacroFab to ruggedize consumer-grade electronics for use by Ukrainian forces, typically by modifying digital prototypes into fabrication protocols that are sent to factories with the capacity to churn out built models quickly. Products range from circuit boards to activate the claws of drone grenade drop kits to hockey-puck-sized satellite base stations valuable to military units because they can keep communications running when cellular internet signals are jammed or spoofed, Govshteyn says.

Among the bottlenecks MacroFab is facing is in microchips, where high demand in consumer products, autos and other areas is far outstripping supply. “The constraint is coming from demand from numerous industries, but the negative impact is felt on products needed for the war in Ukraine—field programmable gate arrays, high-power field-effect transistors, and iridium receiver chips,” Govshteyn says.

To keep pace with orders, which, once finished, are often sold directly to NATO, MacroFab has hired 25 employees within the past nine months: “All this is urgent, and when they place these orders, even though they're placing them for consumer technologies, it's life and death. So they're always asking us to move faster,” Govshteyn says.

The speed and responsiveness needed for modern warfare is also why so much of defense manufacturing is happening on the fringes of the big contracts, according to Brett Velicovich, a former US Army Special Operations intelligence officer, who has brought thousands of drones into Ukraine since the start of the war.

After serving multiple tours in Iraq and Afghanistan and running counterrorism operations and drone strikes against terrorist leaders, Velicovich has more recently turned his attention to humanitarian work, going to Ukraine at the start of the war to extract stranded Americans and, later, helping the nonprofit humanitarian organization UkraineFriends.org evacuate and house Ukrainian refugees and deliver millions of dollars of aid—including 90 ambulances, 75,000 individual first aid kits, 50,000 wound kits, and hundreds of laptops—to civilians, many of whom serve in informal territorial defense units on the front lines.

These aid shipments are often sourced from private donors; their delivery might involve, say, packing 50 to 60 duffel bags of medical supplies on a US commercial jet to Warsaw, passing through Ukraine customs, then loading the bags on trains or rented buses and driving them to makeshift distribution warehouses. Velicovich also works through back channels to deliver drones acquired from private companies to military groups or aid organizations in “serious, pretty dangerous environments,” using open source mapping technology to track the movement of Russian forces.

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Ukraine has an almost unending need for drones, which it has used to great effect on the battlefield, but which are quickly expended. The Royal United Services Institute, a London-based think tank, estimates Ukraine is losing 10,000 drones a month, largely due to Russian electronic jamming; that means they need to be shipped in, or built quickly, to sustain their impact.

Often, the need for flexibility in supplies means that systems are being purchased outside the “sausage making and voodoo” of large-scale US defense contracts, says Andrew ​​Coté, chief of staff at BRINC Drones and former deputy secretary of defense for special operations for the Defense Department. BRINC has delivered 60 glass-breaching Lemur 2 search-and-rescue drones to comb shelled urban buildings for survivors. Often, Coté says, he’s communicated directly with Ukrainian intelligence officers and military officials over Signal and WhatsApp to coordinate deliveries.

Even before Ukraine’s defenders showed the world how effective drones could be on the battlefield, the US was looking at how it could quickly adapt civilian tech for the front line. In 2020, the military’s Defense Innovation Unit selected a handful of drone companies in a competition to design an “inexpensive, rucksack portable” security and reconnaissance drone. One of those was Teal, a company later acquired by another drone manufacturer, Red Cat. The company, which was awarded a total of $2.7 million, worked with the DIU to convert commercial drones costing between $7,000 and $15,000 to meet military specifications.

Since then, Jeff Thompson, Red Cat’s CEO, says, the company has had time to source scarce parts, assemble engineering and product teams, and build out a new factory in Utah that can produce thousands of drones per month. “We are just cranking out drones right now at a great pace,” Thomson says.

Red Cat recently announced that it will fulfill a purchase order to provide 200 long-range, high-speed FPV (first-person view) drones to Ukrainian drone pilots engaged in conflict with Russia. Often operated by former Drone Racing League competitors embedded inside Ukrainian tactical units, FPV drones have been the rising star of the battlefield because of how inexpensive they are to make—some versions can be churned out for as little as $500—and their speed and agility.

Building smart, rather than big, systems, and trusting smaller, more innovative companies, might just be a way to fight wars without breaking the bank. It’s an approach for which the US may look to Ukraine for inspiration. While they still need Patriot Missiles and high-tech artillery, in underground warrens and retrofit manufacturing facilities across the country, Ukranians are using 3D printers and CNC lathe machines to weaponize consumer-grade drones with cameras and aftermarket drop kits.

“If the US, the Northrop Grummans, the Boeings, the Lockheeds of the world understood, actually, how the Ukrainians are doing this on the cheap,” Velicovich says, “they would be out of business.”

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