"There’s a lot of positive signaling, but we need to see the whites of the eyes: We need to see sustained, normalized demand," James Slider, CEO of Performance Drone Works, told Breaking Defense.
Army Materiel Command and the effort to “artificially induce” demand
The Army is overtly trying to create a purchasing environment that will convince manufacturers to build drone production lines on U.S. soil. Jon Strzelec, advanced manufacturing lead for small drones at Army Materiel Command, described the effort as an attempt to “artificially induce” a demand signal for industry at large, acknowledging that companies are reluctant to invest without more certainty about future orders.
That push is part of a broader Pentagon reorganization and procurement surge that aims to field thousands of inexpensive, attritable drones — a shift accelerated over the past 18 months and given new emphasis in a mid-2025 Drone Dominance memo. The Army’s stated target in that memo is to equip every Army squad with small, one-way attack drones by the end of fiscal 2026.
Drone Dominance gauntlet: repeated competitions, measured awards
Drone Dominance is structured as a gauntlet-style competition designed to give companies repeated opportunities to win smaller deals that the Pentagon says will add up collectively — the program is billed as a path to about $1 billion over two years. An online leaderboard tracks competitors, the number of drones ordered, and delivery status.
Under Gauntlet 1, the Pentagon selected 11 companies to deliver 30,000 small drones via initial and “bonus” orders. Orders vary: Farage Precision received 1,520 drones while Neros received orders for 4,960. Gauntlet 2 split platforms into two categories — those best suited for deep strike and those suited for close-quarters combat — and tapped five companies in both categories, awarding deals covering 30,000 drones in each category.
Crucially, the awards under Drone Dominance do not guarantee follow‑on orders. The Pentagon’s approach relies on a series of competitions and smaller awards rather than multi‑year, high‑volume contracts, a choice that supporters say accelerates innovation but that others warn leaves production fragile.
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Get a security leadIndustry response: mixed confidence, repeating themes
Industry voices are split. Skydio Chief Revenue Officer Callan Carpenter described the demand signal as “very strong,” adding that the market spans the Defense Department, the Department of Homeland Security, and civilian federal customers. By contrast, Performance Drone Works’ Slider and others say the signal has not yet produced the predictable, scaleable orders that justify major factory investments or draw private equity.
John Burer, CEO for the American Center for Manufacturing & Innovation industry group, emphasized that manufacturing-scale investments need a “consistent demand signal.” Chad Chasteen, senior director and team leader of Army business development at AV, warned that “continuous competition” without continuous awards creates "all kinds of havoc" in supply chains — and that competitions must be paired by sustained orders if production lines are to stay open.
Andrew Evans, director of the Strategy & Transformation Office inside the Army’s Deputy Chief of Staff for Intelligence (G-2), framed the problem as an “ultimate economic challenge”: how to incentivize industry to build when ordering periods are episodic.
Funding uncertainty: DAWG, FY27 and a reconciliation gamble
The Pentagon outlined plans to spend nearly $55 billion on autonomous warfare initiatives in its FY27 budget, but the bulk of that funding was requested through a reconciliation package. That leaves the money vulnerable to congressional debate and creates additional ambiguity for manufacturers weighing long-term investments.
Under prior naming and organizational changes, the Biden-era Replicator initiative was repackaged as the Defense Autonomous Warfare Group (DAWG) and later absorbed into Task Force Autonomous Warfare. Slider said the stalled DAWG funding is a central source of his uncertainty: “Seeing the DAWG money flow down would be very encouraging for us,” he said, while also noting that opinions vary on whether the money is “definitely coming or definitely not coming.”
How manufacturers, the Army, and Congress are responding
- Manufacturers: Some firms are selling into multiple federal customers and see strong near-term orders; others, including Performance Drone Works, are withholding large capital commitments until they see steady, multi-month production runs and stronger private equity interest tied to predictable follow‑on spend.
- The Army: Army leaders are explicitly trying to create a domestic supply chain by issuing repeated competitions and awards — an approach they describe as deliberately “forcing” supply lines to form inside the country, even if the demand signal must be artificially induced.
- Congress and budget processes: With most of the Pentagon’s nearly $55 billion FY27 request routed through reconciliation, companies and Army officials alike are watching whether lawmakers approve that package or whether the department retools its base request — a decision that will shape whether the demand signal becomes credible at industrial scale.
The Pentagon has chosen a strategy that privileges repeated technical selection and competitive entry over guaranteed, multi‑year production contracts. The question now is concrete: will the gauntlet-style awards and the prospect of DAWG funding translate into the continuous, high-volume orders industry leaders say they need — or will episodic competitions keep supply chains and factories in a perpetual state of start-stop uncertainty?