The executive order reflects broader political criticism of stock buybacks and dividend payments in the defence sector over recent years. It adds: “Every firm across our economy has a right to profit from prudent investment and hard work, but the American defense industrial base also has the responsibility to ensure that America’s warfighters have the best possible equipment and weapons.”
Under the order, Defence Secretary Pete Hegseth is directed to conduct regular reviews to identify contractors that are underperforming or failing to prioritise government work. “If a contractor is identified as such, the Secretary shall provide that contractor with notice describing the nature of the underperformance or insufficient prioritization, investment, or production speed,” the order says.
The document also allows companies to respond after notification, stating that “the Secretary shall then engage as needed with the relevant contractor to resolve the issues identified,” including the submission of a board-approved remediation plan within 15 days. The measures come as the US Navy pursues major shipbuilding programmes, including a new large surface combatant and a frigate based on the Legend-class National Security Cutter.
HII chief executive Chris Kastner said it was too early to assess the order’s impact on the company, noting that HII halted stock buybacks last year. “We’re negotiating a Block VI contract right now and a Columbia Build II contract, and we’re going to establish the schedules for those boats, but within that contract,” Kastner said, adding that schedules are already accelerated compared with previous agreements.
Hegseth, who recently visited HII’s Newport News Shipbuilding, said contractors should no longer expect rewards for poor performance. “The era of rewarding delays and cost overruns is over,” he said, adding that future contracts would favour companies that deliver “on time and on budget” and invest in capacity rather than stock buybacks, executive pay or dividends.
