The latest edition of Defense News’ Top 100 list helps illustrate the continuing struggle of the U.S. Defense Department to broaden and diversify its supplier base.

For years now, and with added urgency since Russia’s full-scale invasion of Ukraine in 2022, the DOD has been trying to expand access to a wider array of suppliers in pursuit of greater capacity, cost competition and technical innovation. The 2024 National Defense Industrial Strategy stated the DOD’s aim is to “accelerate the growth of a more diverse, dynamic, and resilient modern defense industrial ecosystem.”

Despite the DOD’s efforts to attract new suppliers and diversify the industrial base, results are barely noticeable in the data. The top 11 companies by fiscal 2023 defense revenue in the list are the same as they were in fiscal 2015 (excluding Chinese and Russian firms, and accounting for the RTX and L3Harris Technologies mergers).

Big dogs

These 11 firms have maintained a roughly 60% share of the total defense revenues of all non-Russian or Chinese companies on the Top 100 list each year, from FY15 to FY23 — a group that has grown less diverse through the RTX and L3Harris mergers.

The Top 100 is here: Find out how defense companies performed in FY23

Defense Department contract data mirrors this trend. The top nine companies in FY23 by defense contract obligations are the same as they were for FY15 (accounting for the RTX and L3Harris mergers). During that period, those nine companies accounted for roughly 40% of the cumulative U.S. defense contract value each year, barring the COVID-19 pandemic-related blip during the FY21-22 time frame. Only three other companies cracked the top nine during the intervening years, and two of these were Pfizer and Moderna, due to coronavirus-related spending.

Clearly, the commanding heights are occupied by a core group of highly competitive and entrenched players. But even expanding to look at the top 50 awardees of U.S. defense contract value shows a similar lack of change. The top 50 firms in FY15 have continuously accounted for an average of 58% of all spending each year through FY23.

Some new firms are gaining traction in the DOD market. For example, the selection of Anduril and General Atomics for the first increment of the collaborative combat aircraft program seems to indicate the DOD’s willingness to draw on relative newcomers, even in high-end areas normally the preserve of the primes.

But these players represent just a fraction of DOD spending. Anduril and General Atomics are privately held and do not publicly release financial information. Using DOD contract value data, General Atomics ($2.245 billion in FY23) ranks in the top 50, and Anduril ($240 million in FY23) is not among the top 100 for that fiscal year.

Defense acquisition spending is dominated by major platform and weapon systems contracts, and these deals continue to be led by a select group of top prime contractors. Roughly 70% of the FY25 procurement budget is for aviation, shipbuilding, ground vehicles, missile defense and missiles and munitions — areas that mainly consist of large programs of record.

The real impact of the DOD’s ongoing efforts is among smaller firms than can show up on Defense News’ Top 100 list. The DOD has expanded the channels through which new players can engage the department. The seemingly limitless array of venture capital-funded startups is evidence that firms think the DOD is worth the risk, even if the process is difficult.

But the number of newcomer firms that have grown to a substantial size through serving the DOD remains small — such as General Atomics, SpaceX, Palantir and, perhaps soon, Anduril — and they are exceptions to a much broader trend.

Going global

Indeed, the greatest activity in the Top 100 list has been outside the United States. This is due to both rising defense demand around the world and the increasingly competitive nature of global suppliers.

In the Top 100′s FY15 data, U.S. firms accounted for nearly 60% of the $356.7 billion in defense-related revenue. In this year’s list, for FY23, U.S. firms account for just 54% of the $603.9 billion in defense-related revenue.

What’s more, South Korea’s Hanwha shot from 38th place in FY15 to 19th in this year’s list. Likewise, German company Rheinmetall was 27th, but buoyed by Ukraine-related demand, the firm is now 20th. Israel’s Elbit Systems went from 26th to 22nd.

The latest list also includes additions that did not appear in last year’s version based in China, Germany, Turkey, South Korea, India, the U.K. and the U.S.

For China, domestic firms once again started appearing on the Top 100 list for FY18. The most recent time before that when a Chinese business appeared in the rankings was for fiscal 1999. From FY18 to FY23, Chinese firms’ share of the Top 100 defense revenue has hovered at an average of 18%.

Growth among major international companies is another reason it is unlikely that smaller U.S. suppliers will appear on the Top 100 list. However, the limited change to the makeup of the list belies the increased engagement of the DOD, with new suppliers beneath the surface.

Doug Berenson is a partner in the aerospace and defense practice at the consultancy Oliver Wyman, where Ian van Son is an associate.