US Defence: Faster, Lower-Cost Production
The United States is attempting to convert higher defence spending into greater military capability through expanded production, a broader supplier base and more resilient critical supply chains.
This week in Market Watch: Aerospace, Defence & Security, we look at new moves on affordable missiles, cybersecurity rules, critical minerals and radiation-hardened chips.
Money and urgency alone do not create capacity. Success will depend on whether these measures translate into larger inventories, lower unit costs and sustainable manufacturing capacity.
Visiongain Top Takeaways
- Washington is linking procurement reform more closely with the industrial capacity needed to support it.
- Proposed multi-year missile contracts could justify investment in tooling, workforce and additional production lines.
- Affordable mass is becoming a clearer priority, but lower cost will mean little without sufficient range, survivability and accuracy.
- CMMC reform may reduce barriers for smaller suppliers, but must not weaken cybersecurity across the defence industrial base.
- Critical-mineral and microelectronics investments target genuine bottlenecks, but their value will depend on sustained funding and measurable production gains.
Multi-Year Missile Procurement Tests the New Model
The Department of War has signed framework agreements with Anduril, CoAspire and Zone 5 to test and qualify weapons for the US Air Force’s Family of Affordable Mass Missiles programme.
FAMM is intended to provide lower-cost, air-launched cruise missiles in greater numbers. It complements the Low-Cost Containerized Missiles programme, which is pursuing a ground-launched version.
The programme first appeared in the Air Force’s FY2026 budget request. The FY2027 request now sets out plans to procure up to 1,000 missiles, although quantities remain subject to testing, selection and congressional funding.
Washington also wants seven-year procurement agreements, extending the five-year authority already granted. The proposed model combines firm-fixed prices, a minimum quantity floor and shared production across qualified suppliers. Companies that meet targets could receive additional orders, while later competitions would remain open to new entrants.
Longer commitments could give manufacturers enough certainty to invest in tooling, workers and production lines without leaving the programme dependent on one supplier. They are not guaranteed orders, however. Annual appropriations still matter, while firm-fixed-price contracts place much of the cost risk on companies that may not yet have proved they can deliver at volume.
FAMM must also show that lower cost does not come at the expense of military utility. Range, payload, accuracy, electronic-warfare resilience and performance against defended targets will determine whether it provides credible combat mass.
The Air Force plans one competition covering FAMM-L, carried by fighters and bombers, and the palletised FAMM-P. The latter could widen launch options, although transport aircraft would still be required for their core logistics role in a major conflict.
Visiongain Insight: FAMM will matter less for the novelty of the missile than for whether the US can turn longer contracts into reliable output at a sustainable price.
CMMC Reform Tries to Widen the Supplier Base
The Pentagon has suspended Phase II of the Cybersecurity Maturity Model Certification programme, including pending implementation milestones in solicitations and contracts.
The requirements had been due to take effect on 10 November 2026 and would have expanded the use of third-party cybersecurity assessments. Phase I self-assessments remain in place while a task force conducts a 60-day review, drawing on industry responses to a public Request for Information.
Pentagon officials said more than 100,000 defence-industrial businesses still required assessments, with only around 100 assessors available. That imbalance risked creating a backlog that could exclude smaller and non-traditional suppliers from future contracts.
The suspension does not remove companies’ responsibility to protect defence information. NIST SP 800-171 Revision 2 will continue to be enforced through self-assessments and selected government reviews, while obligations under DFARS clause 252.204-7012 remain in force.
Reducing cost and delay could widen competition, but smaller and less well-resourced suppliers remain attractive targets for foreign intelligence services. The review will need to distinguish between lower-risk contracts and companies handling information with serious operational consequences.
Visiongain Insight: CMMC reform could widen the supplier base, but only if a more proportionate system preserves rigorous scrutiny where a breach could compromise an entire programme.
Washington Moves to Secure Critical Supply Chains
Washington is pairing procurement reform with targeted support for vulnerable parts of the defence supply chain.
The Department of War has committed US$25 million to ReElement Technologies to expand rare-earth and critical-mineral refining at its Marion, Indiana facility. The funding covers equipment, installation and working capital for processing end-of-life magnets and other recycled material.
Planned outputs include rare-earth oxides, yttrium, gadolinium, germanium and gallium for use in electronics, sensors, communications and aerospace systems. The agreement also restricts transactions with foreign entities of concern.
Michael Cadenazzi, Assistant Secretary of War for Industrial Base Policy, said the award formed part of an effort to rebuild a domestic “mine-to-magnet supply chain”.
The award targets the processing gap rather than extraction alone. Separation and refining are technically demanding and remain heavily concentrated. Recycling could provide another domestic source of material and complement supplies from trusted allies.
US$25 million is still only one part of a much larger federal effort. It will not by itself resolve weaknesses in feedstock, commercial-scale processing or downstream magnet production.
BAE Systems has separately received US$16 million in Defense Production Act Title III funding to restore its RH45 Storefront for trusted, radiation-hardened 45nm microelectronics.
The facility will provide standard products and support the development of custom chips for missile, space and strategic systems. Jeffrey Frankston, Acting Deputy Assistant Secretary of War for Industrial Base Resilience, said preserving the capability would prevent programmes from being forced into costly redesign and requalification.
The award is one of five DPA Title III investments totalling US$102.6 million since the start of FY2026. The aim is not to develop a leading-edge commercial chip, but to preserve a qualified process that defence systems may require for decades.
Market Outlook
The measures should support demand across munitions production, critical-material processing and specialist defence electronics.
The best-positioned suppliers will be those able to move from development into qualified production at predictable cost. That requires secure access to components, sufficient capital and evidence that output can increase without sacrificing performance.
Significant constraints remain. Multi-year plans still depend on congressional appropriations, while firm-fixed-price contracts can expose companies that underestimate manufacturing costs. Qualification delays, component shortages and poor visibility into lower-tier suppliers could also restrict output.
Domestic production may still need to rely on foreign materials or single-source components several tiers below the prime contractor.
Export orders can sustain production and strengthen allied inventories, but they also compete with US replenishment when manufacturing capacity is already constrained.
