[Text/Observer Network Liu Chenghui] High inflation has had an adverse impact on US defense procurement. According to Reuters html on the 213th, the Defense Industry Association (NDIA) said in a report released this week that the U.S. Department of Defense will need an additional $42 billion in the next fiscal year to make up for the funding gap in the procurement budget due to rising prices. The report also pointed out that from fiscal 2021 to fiscal 2023, the total purchasing power lost by the U.S. Department of Defense due to inflation will exceed $110 billion.
Reuters reported: Defense industry groups said that due to soaring inflation, the Pentagon needs to make up an additional $42 billion
, founded in 1997, is one of the largest military-industrial associations in the United States. It regards itself as a non-partisan and non-profit identity, and builds an exchange and docking platform for enterprises and government organizations. The association warned in its report that “severe inflation is a major challenge” for the Pentagon and its thousands of contractors, further exacerbating the dilemma brought about by the COVID-19 pandemic and the supply chain crisis. The report also issued a call to the US Congress that for companies holding long-term fixed price contracts, Congress should help them alleviate the impact of inflation, such as automatically accounting for price increases in future contracts. The
report revealed that from fiscal 2021 to fiscal 2023, the total purchasing power lost by the Pentagon due to inflation will exceed US$110 billion.
The U.S. consumer price index (CPI) in June rose 9.1% year-on-year, setting a record high in 40 years. CPI rose 8.5% year-on-year in July and still hovered at a high level. And the same "high fever never fades" as inflation is the Pentagon's "ambitions" to deal with the so-called "China-Russia challenge".
National Interest magazine published an article in May this year that the Pentagon is accelerating innovation and R&D work in a targeted manner to keep up with Russia and China's modernization pace and stay ahead. U.S. Deputy Secretary of Defense Katherine Hicks said, "The primary demand for fiscal year 2023 includes US$276 billion for procurement and research and development, testing and evaluation - including land, air, sea, cyber and space. These areas must be fully connected to form a comprehensive deterrent."
The US "Politician" News Network also revealed in July that the Pentagon is developing a "hot air balloon" plan to deal with competition from China and Russia's hypersonic weapon , and plans to invest $27.1 million in fiscal year 2023 to continue to carry out a number of research efforts.
However, the continued inflation undoubtedly hit the Pentagon's plans. Reuters said small defense companies are very important for the healthy development of the defense industry, because their competition can help the Pentagon reduce the cost of contracts, and also help cultivate and provide a stable talent reserve, which is crucial to maintaining the United States' leading position in the field of weapons. To be sure, inflation has affected contracts in all other industries. Given the nature of defense procurement and the reality that there is often only one buyer, defense contractors are unable to negotiate prices with the Pentagon, leading some businesses to call for a reevaluation of fixed-price contracts.
Reuters warned that defense industrial bases are losing funds due to rising costs. Some small American defense companies complain that their contracts are making themselves lose money due to shortages of workers and soaring raw material prices. As the confrontation between China and the United States intensifies conflict with Russia and Ukraine, inflation has caused a decline in the supply capacity of the US defense industry, which will undoubtedly slow down the pace of US defense modernization.
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