The Need for Predictable Orders

Defense companies are generally unwilling to take financial risks without contracts—including multiyear contracts—in place.

It is not a sound business decision to build more munitions or weapons systems without a clear demand signal and financial commitments. This risk aversion is compounded if companies make additional capital investments—especially investments for facilities, infrastructure, and tooling.

As one DoD study concluded:

“Producers benefited from steady or predictable orders, so the DoD’s inconsistent procurement and concurrent production ramps (both increases and decreases) exacerbate the challenges suppliers face across the [defense industrial base].”

I guess, we'll really have to worry when the DoD starts putting in 5-year contracts in place.

Edit:

Consequently, it is important to buy munitions smarter to take advantage of scale and market power. Examples include advanced procurement, multiyear procurement, and economic order quantity processes.