The United States military-industrial complex appears dangerously sluggish. Despite hosting the world’s five largest defense contractors and commanding the most formidable defense budget on the planet, the U.S. could paradoxically be at risk of losing the next major war. The problem? An overgrown, monopolized defense industry that has become a victim of its own size.
According to the Stockholm International Peace Research Institute (SIPRI), Lockheed Martin, RTX Corporation (formerly Raytheon), Northrop Grumman, Boeing, and General Dynamics topped global arms production rankings in 2023. These behemoths dominate the defense landscape with 41 U.S. firms making SIPRI’s list of the 100 largest defense companies worldwide. Yet this concentration of power may be undermining the very security it was meant to ensure.
The problem isn’t the lack of money. In fact, the U.S. is spending more than ever. From $721 billion in 2020 to a staggering $1 trillion in 2025, defense budgets have swelled beyond Cold War levels. Yet instead of increasing capability, much of this funding feeds into a narrow circle of mega-contractors who monopolize defense procurement.
A February 2022 Department of Defense (DoD) report revealed that after decades of consolidation, the number of prime defense contractors fell from 51 to fewer than 10. A June 2024 Congressional study confirmed that just five companies—Boeing, General Dynamics, Lockheed Martin, Northrop Grumman, and Raytheon—receive the majority of contract obligations.
This monopolization, coupled with cost-plus contracts and long-term modernization roadmaps, has led to a stagnation of innovation and a lack of urgency. “This is not competition—it’s cartelized domination,” wrote defense analysts John Spencer and Vincent Viola in Small Wars Journal. “The U.S. defense manufacturing process is dominated by a small cartel of primes…there is no real market competition.”
Cost-plus contracts guarantee profit margins regardless of performance. As a result, defense firms have little incentive to innovate or reduce costs. The result? Complex, over-engineered systems with eye-watering price tags.
Take the F-35, often lauded as one of the most advanced fighter jets in the world. Its lifetime cost exceeds $1.7 trillion, plagued by technical flaws, production delays, and sustainment issues. In contrast, China and Russia are fielding capable stealth aircraft like the J-20 and Su-57 at a fraction of the cost.
This lack of urgency and innovation is endemic. A 2024 CSIS study highlighted that defense-specialist firms, with minimal commercial exposure, now account for 61% of DoD’s major defense acquisition programs—up from just 6% in 1989. Firms with broader economic ties have all but vanished from the defense landscape.
The roots of today’s crisis stretch back to the post-Cold War era. Defense budget cuts in the 1990s forced many companies to either merge or exit the industry. Ford Aerospace, for example, once a manufacturer of missiles and satellites, was sold off by Ford Motor Company in 1990. It was eventually absorbed by Lockheed Martin, emblematic of a trend that hollowed out competition.
The problem compounded after 9/11. As defense budgets rose, so did the reliance on a few giant contractors. Yet unlike tech startups or commercial manufacturers, these defense firms were increasingly insulated from broader market forces, further dampening their drive to adapt or evolve.
Meanwhile, countries like China, India, Iran, and Russia are building leaner, more agile, and significantly cheaper military systems. Iran’s Shahed-136 drone, used extensively in the Ukraine conflict, costs under $20,000. India’s precision-guided Pinaka rocket system costs under $56,000 per missile, while the U.S. equivalent GMLRS costs nearly $150,000 per unit.
India’s Akashteer missile-defense system, costing just $270 million for a full suite of integrated capabilities, stands in stark contrast to the U.S.’s expensive NASAMS or Patriot systems. Even in advanced tech sectors like drones, the U.S. is falling behind in cost-effective production. While the MQ-9 Reaper costs over $30 million, Iran and China are deploying capable alternatives for a fraction of the price.
There is recognition within the highest echelons of government that the system is broken. Air Force Secretary Frank Kendall admitted that failing to secure lifecycle sustainment data for the F-35 was a “serious mistake,” effectively handing Lockheed Martin a perpetual monopoly.
The new F-47 program is being designed with this lesson in mind. The Air Force is demanding full access to all sustainment data from Boeing, indicating a shift towards reclaiming control over military platforms.
Further, a recent White House executive order mandates the Secretary of Defense to deliver a comprehensive plan within 60 days to reform the DoD’s outdated acquisition process. “America must deliver state-of-the-art capabilities at speed and scale,” the order reads.
Spencer and Viola outline several urgent steps:
- Rebuild the acquisition system to emphasize speed, iteration, and real-world feedback rather than decade-long static programs.
- Break up monopolies or introduce credible alternatives to spur competition.
- Prioritize effectiveness over perfection, focusing on scalable, rugged systems.
- Collaborate with allies like India and Israel as equal production partners.
- The message is clear: The U.S. needs to think, build, and fight smarter. The alternative is strategic irrelevance.
This is not the first time alarms have been raised. Yet each time, reform has been slow, derailed by political inertia and lobbying muscle. Today, the stakes are higher. Global threats are more diffuse and technologically advanced. The next war will not wait for a perfect system—it will reward those who can act fast and adapt faster.
The U.S. defense juggernaut may still be unmatched in raw power, but unless it reinvents itself, that might becomes a liability. As John Spencer and Vincent Viola starkly put it: “The time for U.S. defense reform is not coming. It’s already late.”
