Washington loves a good ribbon-cutting. The harder question is who is still carrying the risk after the cameras leave.
That is what makes Anduril’s new Arsenal-2 shipyard worth watching. As the Washington Examiner reported, Anduril plans to invest $3.7 billion of its own capital in a Baltimore County facility that will manufacture components for Virginia-class submarines. The Navy’s contract is worth up to $2.9 billion.
The “software-defined shipyard” label will attract attention. The financing structure should hold it.
For years, Washington’s answer to defense-production delays has been to spend more money through the same industrial channels. Congress funds facility improvements, workforce initiatives, and supplier programs. Yet the Navy still faces major backlogs across six shipbuilding programs, according to the White House’s August shipbuilding memorandum.
Virginia-class production illustrates the problem. The Navy’s goal is two attack submarines per year. As of June 2025, shipbuilders were operating at approximately half that rate. Late materials and shortages of experienced workers continue to slow production.
Arsenal-2 tries something different. The government provides a credible customer and long-term demand. Anduril supplies substantial capital, builds the facility, develops the production system, and assumes real financial exposure if it cannot deliver.
That division of risk should become a model, but Washington should not wait for companies to arrive with multibillion-dollar proposals.
The Pentagon should launch an Industrial Capacity Challenge that identifies the components most responsible for production delays and invites companies to compete to eliminate them.
The first step is specificity. The Pentagon should publish a regularly updated list of production bottlenecks across major programs. Not broad categories such as “supply chains” or “advanced manufacturing,” but specific components, materials, testing capabilities, and processes that prevent finished systems from reaching the force.
Qualified companies could then propose new factories, production lines, or second-source capacity. The government would provide multiyear demand and milestone-based payments. Companies would contribute meaningful private capital and compete for follow-on orders based on actual output.
This would also give emerging manufacturers a clearer entrance into the defense market. Today, a company may have the capital and technical ability to solve a production problem but no reliable way to determine which bottlenecks matter most, whether sufficient demand exists, or how to qualify as a supplier. The government says it wants new entrants while often leaving them to navigate the industrial base through personal relationships and scattered solicitations.
A capacity challenge would replace some of that guesswork with competition.
It would also protect taxpayers. Federal support should follow measurable progress: a permitted facility, an operational production line, qualified components, and deliveries on schedule. Companies that meet those milestones would gain additional orders. Those who fail would lose both the competition and their own invested capital.
There are limits to the model. Submarine construction requires exacting standards, specialized workers, and close coordination with established shipbuilders. New suppliers cannot simply declare themselves ready. The Navy must protect quality while opening more of the supply chain to competition.
But those requirements strengthen the case for a formal pathway. The goal is not to replace the primes. It is to give them more qualified suppliers, more parallel production, and fewer missing components holding up an entire platform.
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Arsenal-2 may eventually add significant submarine capacity. Its more immediate contribution could be proving that defense companies will invest their own capital when Washington provides a real customer, a defined production problem, and a credible path to scale.
The Pentagon should now show the rest of American industry where the next factory is needed.
Taylor Weyeneth is vice president and head of energy, emerging technologies, and national security at Ferox Strategies. He previously served as a congressional chief of staff and in the first Trump administration.
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[ H/T Washington Examiner ]
