(co-authored with Milena Dovali, Emily Desmond and Benjamin Weiser)

As we’ve written before, the U.S. is in the midst of a monumental effort to revive its industrial economy. This transition is resulting in new opportunities and a new industrial geography that is shifting power away from long-dominant “superstar cities” towards cities and metros with a propensity for industrial production. This New Economic Order is being shaped by the need to remilitarize, reshore, and decarbonize the economy, leading to a surge in domestic production across the country.

This month, the US Department of Defense (“DOD”) released two signature documents that remind us of the outsized effect that defense industrial spending has on state and metro economies and the extent to which the defense industrial base is dependent upon smart state and local action.

The first document, the Report on Defense Spending by State in Fiscal Year 2023, from the Office of Local Defense Community Cooperation (OLDCC), is the annual disclosure of defense spending, contracts and personnel on a state-by-state basis. As DODis the largest purchaser in the government, this report is intended to illustrate their reach to all 50 states through contract spending, grants, and personnel.

The second document, the National Defense Industrial Strategy-Implementation Plan (NDIS-IP) is the culmination of a remarkable year of strategic thinking and action, building on DOD’s National Defense Industrial Strategy (NDIS) that was released in January.

As we wrote back in March, the NDIS recognizes that increasing geopolitical tensions alongside decades of contraction and consolidation in the defense industrial base, and more broadly in domestic manufacturing, have weakened the country’s ability to expand the secure production of essential technologies and systems. To remedy this, the NDIS identifies specific actions across four strategic priorities: resilient supply chains, workforce readiness, flexible acquisition, and economic deterrence.

The NDIS goes further by recognizing that addressing national security imperatives requires mobilizing the market energies of cities, metros and states and the networks of public, private and civic entities that make up our decentralized and distributed economic development system. It is intended to catalyze a full national defense strategy, implemented with haste.

Released earlier this week, the NDIS-IP operationalizes the NDIS through 6 interconnected initiatives. Additionally, it builds on the NDIS’s identified risks with a more comprehensive risk mitigation framework, as well as defined lines of effort and outcome metrics that are guiding implementation of the NDIS. In simple terms, it’s a guide to how DOD buys and invests, and for economic development ecosystems to see where they can plug in through local action.

The Implementation Plan shows that the NDIS is not intended to sit on a shelf, it’s the first in what will be annual implementation plans, outlining programs and investments to strengthen the industrial base. The NDIS-IP establishes six cross-cutting initiatives – including focuses on Indo-Pacific deterrence and theater-specific demands, the AUKUS partnership, capability and infrastructure modernization, defense-critical supply chains, and flexible acquisition. Across the six initiatives and their constituent lines of effort are key themes that will bring the efforts to ground in local economies, including:

• Growing and diversifying the defense industrial supplier base, with a particular emphasis on firms in manufacturing and tech spaces;

• Workforce development to grow the workforce of modern manufacturing; and

• Industrial infrastructure investments to modernize, enhance and scale critical infrastructure.

The investments in this area are akin to those in commercial manufacturing for clean energy and broader efforts to reshore manufacturing, but they have a different modus operandi. Rather than flowing through grants, loans and tax incentives, the investments in the defense industrial base flow largely through DOD’s direct procurement and grants. Which brings us back to that first report, from the OLDCC and the broader spatial geography of the defense industrial base.

Spatial Geography of the Defense Industrial Base

The nation doesn’t lack for spatial mapping of civilian manufacturing. The White House and other organizations, such as the Semiconductor Industry Association, have been mapping public and private investments in clean energy manufacturing & infrastructure, semiconductors & electronics, EVs & batteries, biomanufacturing, heavy industry, and clean power. To date, an enormous amount of funding ($910B in private investments and $582.8B in public investments as of September 2024) has been authorized and allocated across these sectors. However, there is still limited spatial mapping of defense investment.

The NDIS-IP highlights the need to understand the geographic distribution of defense manufacturing to support a resilient industrial base. Although the DoD publishes contract, grant, and personnel data by state in the FY23 Defense Spending by State report, it lacks a clear visualization of defense investments at metro and regional levels. As defense spending intensifies to address global security needs and the push for domestic production, the absence of detailed geographic data limit cities and regions from fully engaging with these federal initiatives.

Our Spatial Geography of Defense Manufacturing analysis addresses this gap by identifying where high-value defense contracts are concentrated. Examining data from USASpending on high-value contracts (those exceeding $500 million in initial or modified awards from 2021–2024), the analysis aims to capture the key regions and vendors that anchor the defense industrial base, complementing the civilian-side research and highlighting regions with the infrastructure, workforce, and production capacity critical to national security.

Our research shows that defense manufacturing investments are spread across the country, but a significant portion of funding is concentrated in a few key metros. By aggregating contract amounts by metropolitan statistical areas (MSAs), we identified the distribution of $340 billion across 192 awards, 39 vendors, and 41 MSAs. Dallas-Fort Worth-Arlington, New York-Newark-Jersey City, and Seattle-Tacoma-Bellevue have emerged as the top three defense manufacturing hubs (see figure 1), driven by large contracts awarded to companies like Lockheed Martin, Pfizer and Boeing. As a result of these contracts, their respective regions are seeing significant economic benefits, including job creation, which, in many cases, complement investments in civilian-oriented manufacturing.

The Dallas-Fort Worth metro area, for example, has been awarded the greatest number (27) of large contracts and modifications ($500M+) from FY21-24, totaling over $71 billion in investment for defense manufacturing. This investment builds upon Fort Worth’s strong foundation in aerospace with Lockheed Martin’s significant presence as well as the headquarters of Bell Textron, which was just selected to produce the Army’s Future Long-Range Assault Aircraft (FLRAA) and awarded a contract of over $1 billion. These outsized DOD vendors are supported by an ecosystem of mid-sized companies such as GKN Aerospace and Elbit Systems of America, further indicating the prominence and depth of the Dallas-Fort Worth-Arlington defense economy.[1]

Figure 1 illustrates the geographical distribution of these contracts by MSA and the ranking of the top 15 metros with the highest spending across these high-value contracts. Appendix A in the full report provides a full list of MSAs receiving contracts over $500 million.

Figure 1: The Geographic Distribution of High-Value DoD Contracts and the Top 15 Metros by Spending

The Nowak Metro Finance Lab website presents this analysis in an interactive tool. It consists of two parts: one maps total defense funding by MSA, showing rankings and detailed spending when a specific MSA is selected. The other part focuses on individual contracts, mapping where they are performed. Selecting a specific contract reveals additional details such as the recipient, purpose, amount, and awarding subagency. This tool allows users to directly engage with the data, providing deeper insights into high-value DoD manufacturing contracts across the country.

Why does this matter

The spatial geography of the defense industrial base is largely the result of path dependencies relating to long-lasting investments in traditional manufacturing of aircraft, naval craft, munitions, and other materiel. But this is not our parents’ or grandparents’ military industrial complex.

A recent Financial Times article by the heads of the CIA and the UK Secret Intelligence Service shows how technological change is altering the warfare and defense industry. As they write:

“Ukraine has been the first war of its kind to combine open-source software with cutting- edge battlefield technology, harnessing commercial and military satellite imagery, drone technology, high and low sophistication cyber warfare, social media, open-source intelligence, uncrewed aerial and seaborne vehicles and information operations … at incredible pace and scale. Most of all, it has underlined the imperative to adapt, experiment and innovate.”[2]

The substantial funding that DOD is channeling into metro areas across the country has the potential to not only revitalize local economies but transform them. This presents an opportunity for metros to originate, or build on, their position in the broader industrial transition.

Cities and metropolitan areas that are purposeful and intentional can reap a substantial “defense dividend” by using military spending to move up the value chain of production, becoming hubs of supply chain firms as well as energy and technology innovation.  As we wrote last year,

“… [Smart communities can go further, leveraging defense spending to grow quality jobs, equip workers with the skills they need, fund local suppliers, redevelop central business districts with excess office capacity, accelerate the clean energy transition and drive the formation and expansion of innovative technology companies.”

The defense dividend, in other words, can be game changing for those communities organized and willing to seize it, both to tap into the defense investment apparatus and leverage it for spillovers into the civilian-side. All of this requires a focused and disciplined ecosystem and a step change in the relationship between large defense contractors, technology companies, research universities, community colleges, energy utilities, business leadership groups and state and local economic development organizations.

It is a sign of our times that DOD has emerged as the federal agency which best exhibits strategic vision, implementation focus and spending transparency. The NDIS and NDIS-IP are must read documents for mayors, county executives and governors and their business, university and civic partners. Every city, county, metropolis and state must assess their starting position in the modern defense industrial base and the role they play in making our country and the world more secure.

[1] https://fortworthedp.com/why-fort-worth-texas-is-an-emerging-frontier-for-aerospace-and-energy/

[2] Bill Burns and Richard Moore, “Our intelligence partnership helps the US and UK stay ahead in an uncertain world,” Financial Times, September 7/8, 2024

Bruce Katz is the Founding Director of the Nowak Metro Finance Lab at Drexel University. Milena Dovali and Benjamin Weiser are Research Officers at the Nowak Lab. ​Emily Desmond is a Special Projects Manager at the Nowak Lab.

Research Analysts Ying He and Atara Saunders also contributed research to this report.