Introduction

The National Defense Authorization Act (NDAA) for 2025 includes a mandate that contractors furnish information and documentation to enable the military to modify and repair equipment and systems. Not surprisingly, industry is pushing back on that mandate. On September 25, Senator Elizabeth Warren (D-MA) sent a letter to various industry associations, questioning their motives to prevent a right-to-repair requirement that the Senate included in its proposed defense budget for fiscal year (FY) 2025. Warren also sent a separate letter to Secretary of Defense Lloyd Austin, expressing concern about contractual restrictions that void contractor warranties when third parties perform repairs and that prevent access to operations, maintenance, integration, and training data.

The provision at issue is Section 828 of S. 4638, requiring contractors to provide “parts, tools, and information” to the Department of Defense (DoD) on a “fair and reasonable basis” to enable the government to modify and/or repair the equipment and systems that it procures. DoD’s FY 2024 budget calls for $841.4 billion, of which 20% is devoted to procurement of military hardware.

Right to Repair, Generally

The government is not the first to demand the right to repair, which has gained steam across the U.S. for more than a decade. This grassroots movement comes in response to the manufacturing and technology industry’s increasing efforts to protect intellectual property as equipment, gadgets and devices become more complex with respect to hardware and software. For example, automobiles now come with a suite of connected software features integrated with complex hardware. Manufacturers often limit consumers’ access to tools, components, and software required to make product repairs because such repairs are simply too complex for the general public to successfully execute — and the consequences of an ineffective repair can be deadly. As a result, manufacturers have increasingly required their products to be repaired only by the manufacturer itself or approved service providers. Consumers argue that this arrangement stifles competition in the marketplace, leaving them with only a few options to repair products — options that often are inconvenient and expensive. Section 828 of the FY 2025 NDAA is unique because it takes the consumer-driven concept of right to repair and applies it in the context of government contracts.

Likewise, Warren is not the first member of Congress to suggest that defense contractors should allow the military to fix its own equipment. A proponent of consumers’ right to repair, House Representative Marie Gluesenkamp Pérez (WA-03), offered an amendment to FY25 NDAA that would require the secretary of defense to submit a report to the White House Competition Council analyzing the potential cost savings to DoD if the proposed right-to-repair mandate is adopted versus the value of IP owned by contractors.

Opposition of Industry Groups

At least 60 national associations and trade groups went on the record to express their collective opposition to the right-to-repair mandate. The industry groups’ objections include:

• No Trade Secret Protection: Section 828 mandates that Department of Defense procurement contracts require contractors to provide continuous access to all repair materials and information without recognizing or allowing for continued protection of contractor trade secrets.
• Price Controls: Section 828, if adopted, would enable DOD to impose rigid, nonmarket-driven, price controls on repair materials and information, which would impose significant financial burdens on contractors, especially small and medium-sized businesses.
• Existing Support: The associations argue that existing agreements already provide necessary repair and maintenance support, making the requirement to provide access to repair materials and information unnecessary.
• Discouragement to Sell: The mandate would reduce and potentially eliminate the economic incentive for companies to sell their products to DoD, potentially shrinking the defense industrial base.
• Economic Impact on Dealers: The imposition of price mandates would negatively impact authorized dealers by eliminating dealer margins, harming the network of manufacturers and dealers that the department relies on.
• No Corresponding Benefit: The industry groups claim that Section 828 would have a significant negative impact on the manufacturing supply chain and the defense industrial base without providing a corresponding benefit to U.S. national security.

Warren’s Response to Select Industry Associations

In her September 25 letter to The National Association of Manufacturers, the National Defense Industrial Association, the Aerospace Industries Association, and the Professional Services Council), Warren asked the recipients to provide “transparency about why [the] associations oppose DoD’s fair and reasonable access to repair materials.” She requested the following information:

• Revenue and Profits: The total revenue and profit made by defense contractors from operations and maintenance service contracts with DoD over the past five years.
• Lobbying Expenditures: The amount spent by these organizations on lobbying efforts to prevent the inclusion of the right-to-repair mandate.
• Impact Analyses: Any internal analyses conducted by association members on the impact of Section 828 on their revenue and profits, and the results of these analyses.
• Decision-Making Process: The process by which organizations decided to endorse the letter opposing Section 828, including whether these endorsements were approved by member or board votes.
• Endorsement Strategy: The rationale and methods for seeking endorsements from organizations seemingly unrelated to DoD right-to-repair policies.
• Contractual Terms and National Security: Whether industry groups believe that contractual terms restricting on-site repairs by service members promote national security or efficient use of taxpayer dollars.
• Repair Restrictions at Sea: Whether industry groups believe contractual terms that require calling in contractors for repairs at sea promote national security or efficient use of taxpayer dollars.
• F-35 Repair Restrictions: Whether industry groups believe contracted-out sustainment of the F-35, which limits service members’ ability to repair the aircraft, promotes national security or efficient use of taxpayer dollars.
• Vehicle Repair Restrictions: Whether industry groups believe contractual terms prohibiting repairs of certain military vehicles by mechanics promotes national security or efficient use of taxpayer dollars.

Setting aside Warren’s desire for transparency, what she is seeking consists of information, cost data, financial projections, and business analyses that companies typically choose to keep confidential. This includes proprietary, commercial, and financial information of the sort that is covered by Freedom of Information Act (FOIA) Exemption 4. In other words, this is not information a company would freely release to the world, let alone to its competitors (many of whom are members of the same trade groups). Hence, it is unlikely that the information requested has been provided, and it is unreasonable to expect that anyone would or should provide such information publicly.

Takeaways

The debate over the inclusion of Section 828 in the FY25 NDAA has significant implications for the economics of defense contractors writ large. The proposed right to repair, if adopted, will surely alter the contractual dealings between contractors and DoD. This has the potential to cause some companies to exit the DOD marketplace, to discontinue relationships with distributors, resellers, and dealerships, and to vastly increase the price of products sold to DoD in partial set-off against economic losses attributed to delivery of intellectual property embedded in right-to-repair materials, to name just a few potential consequences.

Contractors should expect DoD to invoke the mandate in every solicitation and contract, thereby obligating the contractor to deliver data items, such as detailed operations, repair and maintenance instructions, specialty tools, software (application and object code), and more.

Also as a result of this change, original equipment manufacturers (OEMs) necessarily will lose the revenue associated with repeat maintenance and repair/modification business. As revenue goes down, unit costs tend to go up and margins tend to shrink. All in all, the potential right-to-repair provision is not good for the defense industry’s financial statements.