Pentagon Hands Defense Giants 'Blank Checks' as Artillery Costs Explode 300%

Since early 2022, the price of a single 155mm artillery shell has climbed from approximately $2,100 to over $8,400. This 300% increase is not merely a byproduct of inflation or supply chain friction. It is the result of a procurement strategy that hands billions to defense contractors before the government knows what the final bill will be. This mechanism, known as an Undefinitized Contract Action (UCA), has become the preferred tool for the Pentagon’s senior leadership to bypass fiscal safeguards in the name of international security.

Undefinitized Contract Actions (UCAs) are legal agreements that allow the Department of Defense (DoD) to authorize contractors to begin work and receive payments before the terms, specifications, and final prices are legally settled. Under standard federal acquisition regulations, the government is supposed to 'definitize' or finalize these prices within 180 days. However, a recent report from the Government Accountability Office (GAO-24-106313) reveals that the DoD consistently fails to meet this deadline, leaving billions in taxpayer funds unmonitored for months or years at a time.

The leverage in these deals sits entirely with the contractors. Once a company like RTX (formerly Raytheon) or Lockheed Martin is 50% through a production run, the government loses nearly all bargaining power. It cannot cancel the order without incurring massive termination costs, and it cannot easily find a new supplier for specialized munitions. At this stage, the contractor can present a final price that includes significant margins, knowing the Pentagon is already committed. According to RTX’s 2023 SEC 10-K filing, the company reported record backlogs and increased profit margins, citing high demand for systems like the Javelin and Stinger—both of which are heavily funded through these unpriced UCAs.

The personnel overseeing this shift have direct ties to the companies benefiting from it. Secretary of Defense Lloyd Austin joined the Pentagon directly from the board of directors at Raytheon. Under Secretary of Defense for Acquisition and Sustainment William LaPlante, the chief weapons buyer, has consistently advocated for 'speed over process.' Under LaPlante’s direction, the DoD has frequently waived the requirement for contractors to provide Certified Cost or Pricing Data, which is a requirement for contractors to submit verified data showing their actual costs of production to prevent price gouging.

Mainstream coverage often characterizes this shift as the 'Arsenal of Democracy' cutting through red tape to support allies in Ukraine and Israel. This narrative ignores the fiscal reality. In the 2024 National Defense Authorization Act (NDAA), Congress included provisions that further loosen oversight on UCAs for 'critical' munitions. This legislative change was supported by a bipartisan group of lawmakers who, according to OpenSecrets data, are among the top recipients of campaign contributions from Lockheed Martin and RTX’s political action committees.

While the Pentagon fast-tracks these deals, the internal accounting is a mess. The GAO report notes that the DoD does not even have a centralized system to track how many UCAs are active or how much the final prices deviate from the initial estimates. This lack of transparency serves as a shield for what is effectively a monopoly market. Because the 'Big Five' defense firms have consolidated so thoroughly, there is no competitive bidding to drive these 300% price hikes back down. Regulatory Capture occurs when a government agency, created to act in the public interest, instead advances the commercial or political concerns of special interest groups that dominate the industry it is charged with regulating.

For the average American, the impact is a direct transfer of public wealth to private shareholders. Every dollar added to an 'undefinitized' contract for an artillery shell is a dollar removed from domestic priorities like infrastructure or healthcare. When a shell that used to cost $2,100 now costs $8,400 without a clear explanation of cost increases, it represents a massive premium paid by the taxpayer for the Pentagon's inability—or refusal—to negotiate. This system ensures that while production capacity for weapons remains lower than expected, the dividends and stock buybacks for defense contractors remain at record highs.

To see how your representative voted on the 2024 NDAA and how much they received from defense contractors, visit the Gen Us Politician Tracker. You can also explore our deep dive into the 'revolving door' between the Pentagon and the RTX board of directors in our Corporate Influence database.