The ‘Shrinking’ defense industrial base: A survey of former DoD prime contractors

Abstract

The recent decline in the number of prime contractors participating in the defense industrial base (DIB) is a well-documented and often lamented phenomenon, yet there has been a paucity of empirical research on the topic. This study was designed to investigate the types of contractors leaving the DIB and their reasons for exit, and to gain a truer estimate of the rate of exiting contractors in the “shrinking” DIB. Roughly 45,000 contractors that last held a prime contract with the Department of Defense (DoD) in Fiscal Years 2015–2022 were sent a brief survey investigating their presumed exit from the DIB. Of the 1,037 survey responses received, 679 were from contractors that acknowledged they had left the DIB and provided a detailed reason why they left. Three-quarters of the respondents were smaller businesses, reporting less than $5 million a year in revenue and employing less than 50 employees. Roughly one-third of all confirmed exits cited an unfavorable characteristic of working with the DoD as the main reason for leaving the DIB, and moreover identified the specifically problematic characteristic(s). Results also indicated that existing estimates of contractor exits from the DIB are likely to be inflated by about 50%.