Defense contractors are perplexed by President Trump administration’s executive order outlining vague new rules for its weapons suppliers, unsure how to proceed and raising questions about its legality.President Trump administration’s executive order outlining vague new rules for its weapons suppliers, unsure how to proceed and raising questions about its legality.
The executive order — echoing recent speeches delivered by Defense Secretary Pete Hegseth and Treasury Secretary Scott Bessent — Pete Hegseth and Treasury Secretary Scott Bessent — rebukes defense firms for stock buybacks, paying dividends to investors and high compensation for CEOs, rather than using profits to invest in plant capacity.
But while defense experts and company executives agree more could be done to bolster the defense supply chain, they argue the executive order is legally questionable and lacking a clear roadmap on the path forward to do so.
“If you’re trying to encourage more companies to get involved and be suppliers to the DOD, this is not the best way to do that,” one defense industry lobbyist told The Hill, referring to the Department of Defense. “Companies may not want to do business with DOD if they are subject to this. Plus, obviously it’s not legally enforceable to stop dividends and cap pay, so how do you enforce that?”
Trump in early January signed an executive order aimed at addressing cost overruns and delayed timelines in delivering weapons. He followed up with a lengthy Trump Social post that loudly declared “MILITARY EQUIPMENT IS NOT BEING MADE FAST ENOUGH!”
“Defense Contractors are currently issuing massive Dividends to their Shareholders and massive Stock Buybacks, at the expense and detriment of investing in Plants and Equipment,” the president wrote. “This situation will no longer be allowed or tolerated!”
He also claimed that defense executives must build new and modern production plants and, until they do so, should not be allowed to make more than $5 million dollars annually.
Bessent on Tuesday defended Trump’s move, accusing U.S. defense companies of falling short of their patriotic duty by not delivering weapons on time.
“These defense contractors have let down the American people,” Bessent said at the World Economic Forum in Davos, Switzerland, saying they were “five, six, seven years behind on fulfillment of their contracts.”
“So I do not think it is unreasonable to tell them that until further notice, you need to build more factories and buy back less stock,” said Bessent.
He also backed Trump’s proposal that no defense firm CEO should earn more than $5 million until they up their company’s production speed and maintenance, claiming that executives “are making $30 [million], $50 million a year for failing the American people.”
Those figures are far above the more than $18 million the CEOs of the top five defense contractors — Lockheed Martin, RTX (formerly Raytheon), Boeing, Northrop Grumman and General Dynamics — earned in 2024, according to company filings.
Northrop Grumman did not respond to a request for comment from The Hill while RTX, Boeing and General Dynamics declined to comment.
A Lockheed Martin spokesperson only told The Hill that the company shares Trump’s and the Pentagon’s “focus on speed, accountability, and results, and will continue to invest and innovate at scale to ensure our warfighters maintain a decisive advantage and are never sent into a fair fight.”
Speaking at a Lockheed Martin facility in Texas last week, Hegseth declared that the defense industry is “not just about Wall Street and dividends and stock buybacks.”
“It’s about the Warriors and what we can deliver as fast as possible to them…,” Hegseth said.
“President Trump’s deadly serious about this. He feels the urgency of the moment, and so do I.”
But the administration has not said how it would compel firms to carry out Trump’s demands. The Pentagon and White House did not respond to requests for comment from The Hill on how long the order is expected to be in effect and who it applies to, among other questions.
The Pentagon declined to answer the same questions, only offering a statement that claimed the executive order would “ensure efficiency and accountability.”
“After numerous years of failing to meet contractual obligations, under President Trump’s order, defense contractors will no longer be allowed to leave our warfighters behind while giving themselves massive payouts from stock buybacks,” chief Pentagon spokesperson Sean Parnell said in the statement.Sean Parnell said in the statement.
“This will give the Department of War the ability to meet national security objectives and ensure efficiency and accountability. Our obligation is to our warfighters; not Wall Street.”
Bessent on Tuesday touched briefly on the timeline of the order, saying, “we can talk about removing those restrictions” once companies get to a normalized level of backlog, around two years or three years.
“I just don’t think people know how to navigate this just yet,” the lobbyist said. “I think that there’s some legitimacy to the argument that the companies are focused primarily on rewarding shareholders than anything else — these companies are more concerned about what weapon systems they make the most profit off of versus what the systems are that the government needs the investment into.”
They added: “It’s a good way to start a conversation, but it’s unclear how to handle that.”
Trump in his second term has sought to implement a sweeping overhaul to how the Pentagon buys weapons, a restructuring aimed at having the U.S. military more quickly acquire new armaments and technology.
The reforms are meant to target what the administration sees as an unacceptably slow procurement process, with officials blaming bureaucracy, misaligned incentives and lack of competition that has knee-capped the military’s ability to get new technology into the hands of warfighters quickly.
“One thing’s clear, he’s sick of big prime contractors, they’re over budget and over schedule. He’s clearly sending a message,” said Jeff Green, a Washington-based lobbyist with J.A. Green & Co.
“Anybody that’s surprised by this isn’t paying attention and doesn’t understand how the president uses leverage,” Green added. “I’m just amused at the number of people in town that are throwing up their hands saying, ‘I can’t believe it.’ I’m like, ‘where you been last year?’”
The idea for acquisition reform has received little pushback in Congress, which has long decried cost overruns and delays of such high-profile weapons as the F-35 fighter jet and the Boeing-made KC-46 tanker. But Congressional appropriators this week warned that speed “must be factored alongside cost, performance, lethality and scalability.”
The Pentagon has long been criticized for inflexible internal workings, unpredictable buying patterns and multi-year contracts with one company that can destroy competition. Lawmakers want to see the Defense Department address these issues before providing more budget flexibility (Trump is pushing to increase the Pentagon budget by some 50 percent).
On the industry side, contractors complain about the Pentagon not consistently buying a certain weapon or piece of equipment year-over-year, which forces companies to slow their supply chains or shutter them altogether, making it difficult and costly to quickly start back up.
“Rapid delivery of ineffective weapon systems at exorbitant cost will not serve the warfighter well,” the appropriators wrote in the House’s final 2026 minibus funding package, released early Tuesday. Defense spending in the bill is set at more than $839 billion, about $8.4 billion more than the White House’s fiscal 2026 request.
Appropriators also said they were concerned that recent reductions to the acquisition workforce due to DOGE’s massive federal layoffs — “the effects of which have yet to be realized” — will negatively affect the Pentagon’s ability to achieve any speed and agility sought by reforms.
One company Trump singled out is RTX, calling it “the least responsive” and threatening to cut the firm’s government contracts if it didn’t spend more on plants and equipment. The contractor is the maker of Tomahawk cruise missiles, used in recent strikes in Nigeria and in Yemen against Houthi targets last year.
But Tomahawks take years to produce, with the company only churning out 50 or 60 annually, far below the hundreds the administration used last year alone.
“Either Raytheon steps up … or they will no longer be doing business with” the government, Trump said in a separate Truth Social post.
RTX did not respond to a request for comment from The Hill on the attacks from the president.
Trump has also complained about the two new Boeing-built Air Force Ones ordered in his first term that have faced serious delays and likely will be completed just as Trump is about to end his second term or right thereafter.
The two planes currently used as Air Force One have been in the air for nearly four decades. Their age was on display Tuesday when a minor electrical issue aboard one aircraft led the crew to turn it around 30 minutes into Trump’s flight to Davos, Switzerland.
“He’s being turned around in the middle of the night on Air Force One, because all the power goes out, and he’s like, ‘Where the hell is my plane? It’s going to be ready when I’m out of here.’ So what do you think he’s going to do?” Green said.
Some defense firms have argued, however, that they should not be subject to the administration’s demands, including Leonardo DRS. The company insists it has invested its fair share to make sure it is expanding capacity.
“We’ve invested a lot of money in making sure that our customers are successful, expanding capacity and innovating,” John Baylouny, Leonardo DRS’s newly appointed president and CEO, told National Defense last week.
He added that the administration is in the right mindset in urging defense contractors to invest more, but that DRS “is leaning forward” and “shouldn’t be on the naughty list.”
