Aerospace Mid-Tiers Ready For Primetime To Expand The Industrial Base (From RealClearDefense)

A small group of mid-tier defense firms is delivering on major aerospace programs. Read here and below.

The Pentagon wants its mid-tier aerospace companies back. 

Once upon a time, during the Reagan buildup of the 1980s, there were 51 major defense vendors in the aerospace sector.   By 1998, there were just 5.  As the post-Cold War defense budget fell 60%, Pentagon leaders opted to nurture a few large companies and hope for increased use of commercial “off the shelf” parts and software to carry overhead.

Those giants produced epic systems from F-35s to Patriot missiles and are delivering day after day for the warfighter. 

Fast forward to 2025 and the competition with China.  Brandishing their expertise in data and open systems architectures, a new cohort of strong, capable mid-tier defense companies is quietly reshaping how the Pentagon does business, especially in the aerospace sector.  The rise of the mid-tier defense companies, from drone makers and upgrade specialists to prime contractors in charge of major aircraft and weapons programs, is expanding the aerospace industrial base — and just in time.  These mid tiers do business their own way and seek out opportunities to break the mold. 

Four examples show the growing role of mid-tier primes. 

Survivable Airborne Operations Center (SAOC.)  When Boeing and the Air Force could not reach an agreement on data rights and contract structure, SNC stepped up for the win.  The first company-led flight test for the “doomsday plane” took place Aug. 7, as SNC continues to hit critical program milestones.  The $13B contract for five Survivable Airborne Operations Center aircraft through 2036 marks the biggest award yet to a mid-tier, designating SNC as a major aerospace prime.  “As one of the only privately-owned mid-tier defense contractors, SNC has the foresight to invest early to stay ahead of customer needs,” said Jon Piatt, executive vice president for SNC.  They’d already made significant investments in facilities well ahead of the SAOC contract award, and continue proactive investments to deliver for customers, according to Piatt.  

Collaborative Combat Aircraft (CCAs.)  The Air Force opened up significant new market share with the award of contracts to General Atomics and Anduril for its first tranche of CCAs.  The General Atomics YFQ-42A flew in August.  “In record time, CCA went from concept to flight — proving we can deliver combat capability at speed when we clear barriers and align around the warfighter,” praised Secretary of the Air Force Troy Meink.  The Air Force is counting on the combat edge of the CCAs, and while several companies will compete for future tranches, the mid-tiers are in the mix on equal footing.

Navy Undergraduate Jet Training System (UJTS.)  Watch how the Navy proceeds in its quest for a new jet trainer to replace the T-45 Goshawk, in service since 1991.  The Navy’s competition for its undergraduate pilot trainer is still in the request for information phase, but the Navy hopes to buy at least 145 trainers starting in 2028.  Potential primes are lining up, including a capable mid-tier offering from SNC with their Freedom trainer, which was unveiled at the Reno, Nevada Tailhook annual convention Aug. 23.  The accelerating changes to the future carrier air wing demand a data-centric replacement for the T-45 that can deliver longer sorties at lower cost and without the maintenance bills associated with the T-45.  Boeing, Lockheed Martin, and Textron/Leonardo are all in the hunt with existing trainers such as Boeing’s Air Force T-7A Red Hawk that can be modified for sea-service specifics.  SNC has taken a “deliberately different approach” with a clean-sheet design laser-focused on meeting Navy needs – such as landing gear to accommodate carrier training – according to their sleek video.

Golden Dome.  The Golden Dome missile defense project will rely on proven defense primes but it also underscores the need for more industrial base capacity.  In this case, two mid-tiers are already paired up.  “The Trump Administration understands what has been a long-held belief within the defense industry – there is an immediate and critical need for a layered system that provides a last line of defense to protect America against current threats and next-generation aerial attacks from near-peer and rogue nations,” said Wahid Nawabi, President and Chief Executive Officer of AeroVironment. Nawabi believes AV and SNC offer “novel and affordable defensive solutions” in the $175 billion project alongside larger defense primes. 

Of course, the mid-tiers in aerospace are far from Fortune 500 companies.  Several, like General Atomics and SNC, are privately-owned.  Palantir has been a stock market darling even with revenues at just $2.8 billion for 2024. The mid-tiers vary in corporate culture, but they share a passion for results and an ability to make quick decisions.  The mid-tiers are also hungry for new ventures.  Anduril teamed with tech giant Meta in May 2025 to design virtual reality military headsets. 

The mid-tier renaissance is driven by the emphasis on open systems architectures.  Anduril, Palantir, SNC, and others have won major program work due in part to their agility with open systems.  Mid-tiers bring exceptional skills in data and open architectures – after all, that’s how many of them have distinguished themselves. 

For the services, open systems architecture is not just a buzzword.  The emergence in the 2000s of switched fabric technologies enabled the establishment of common standards for today’s high-bandwidth, point-to-point communications. By 2019, the Secretaries of the Army, Navy, and Air Force joined together and issued a mandate for Modular Open Systems Architecture, stating that “sharing information from machine to machine requires common standards.”   The latest iterations of rugged standards also address the cooling required for advanced electronics

Agile mid-tier defense companies must step up in order to expand the capacity of the industrial base.  For example, holding the prime position on contracts entails responsibilities to suppliers across the industrial base.  Primes have long assisted their subcontractors with engineering expertise, cybersecurity, and management advice, and program managers regularly monitor the financial health of their suppliers. 

To get the most out of the mid-tiers, the Pentagon will have to give more weight to their strengths: software, affordability, and agility.  Since those are precisely the qualities program managers say they are seeking, relying more on the mid-tiers should be a no-brainer.

AI, software, and high-speed data are revolutionizing warfare, and the corporate structure of the defense industrial base is picking up on this advantage.  Victory now goes to the defense vendors who offer not just superior performance, but a proven ability to integrate information systems at a favorable price. 

Dr. Rebecca Grant is Vice President, Defense Programs, at the Lexington Institute.