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The Daily Scoop Podcast
The evolution of the defense industrial base in the age of AI and autonomy
00:26:57
Amid ongoing conflicts and looming threats from p…
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Today on the Daily Scoop Podcast from the Scoop News Group, the evolution of the Defense Industrial base in the age of AI and autonomy. Hon. Michael Katanazi, Assistant Secretary for War of Industrial Based Policy, joins the podcast. It's Tuesday, March 24, 2026. Welcome to the Daily Scoop Podcast where you'll hear the latest news and trends facing government leaders. I'm the host of the Daily Scoop Podcast, Billy Mitchell. Thanks so much for joining me. Before we get to today's featured interview, let's dive into the day's top headlines. The cost to run Direct file for the 2025 tax filing season was tens of millions of dollars less than what the IRS estimated it would be, according
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to a new watchdog report.
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The Treasury Inspector General for Tax Administration found that the IRS ended up spending $16.2 million on the since canceled free electronic filing service in fiscal 2025, far shy of the $61.2 million projected by the IRS. That $45 million gap appears to undercut one of Direct File opponents main complaints about the Customer Appraised Digital initiative that it was supposedly an inefficient use of government tax resources. However, TIGTA noted some caveats to the finding. The IRS initially overestimated how many people would use Direct File and how many assistors would be needed to support them. Just 751,000 taxpayers registered with Direct File. For its limited second season, the irs estimated that 32 million taxpayers would be eligible to use the tool, according to the Treasury Watchdog. Of Those who registered, 59% did not ultimately submit a tax return through the system. Direct File supporters have long contended that
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load usage rates reflected a lack of
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awareness and federal engagement. The report represents a bit of a mute point given the Trump administration's decision to kill Direct File last year and instead point people toward the tax agency's
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little used free file program for filers
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below a certain income threshold. But TIGTA did report some Direct File successes that should be incorporated as the agency looks for opportunities to strengthen and expand existing free filing programs. Now, moving on to other news, the Federal Aviation Administration is collecting information about the evolving operational and infrastructure needs of airports. Given the increasing integration of unmanned aircraft systems, the FAA aims to catalog and inventory best practices for airport design standards and standalone facilities called drone ports. As part of the request for comment published in the Federal Register on Monday, the Department of Transportation wants to interview representatives from equipment manufacturers, unmanned aircraft system vendors, the military and other stakeholders. After the comment period closes next month, the FAA will use responses to inform a report that will then shape operational evaluations and standard setting tied to the integration of drones. The information gathering effort comes amid a heightened focus on drone and counter drone technologies. The FAA laid out plans to create an office overseeing the integration of drones and other advanced aviation technologies as part of its broader organization beginning in January. For more news at the intersection of the federal government and technology, make sure to visit fedscoop.com amid ongoing conflicts and looming threats from peer adversaries like China, conversations around the American defense industrial base have shifted from capacity to resilience and speed. Meanwhile, software, AI and autonomy have emerged as key drivers for modern military operations. And with that, the defense industrial base has evolved to incorporate new non traditional vendors that don't see themselves necessarily as prime defense contractors. That transformation and fielding efforts to bolster it are the focus of the Pentagon's Office of the Assistant Secretary of Defense for Industrial Based Policy led by Honorable Michael Katanasi. I recently spoke with Katanasi about the new and ongoing policy efforts of his office to wrap its arms around, support and grow the modern defense supply chain, the challenges it faces, how it can keep pace with commercial innovation and what comes next. Let's go now to that conversation with Honorable Michael Katanazi.
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All right, well, welcome everybody. I'm very excited today to be joined by the Honorable Michael Katanazi.
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Mr. Catanazi was sworn in as the
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Assistant Secretary of War for Industrial based policy on September 23, 2025 and in that role he is the principal advisor to the Undersecretary of War for Acquisition and Sustainment on industrial based policies and leads the Department of War's efforts to develop and maintain the US Defense Industrial base to ensure secure supply chain of materials critical to national security. And then just briefly, before that, he was a serial entrepreneur and consultant with experience in managing and addressing challenging issues across the aerospace and and defense sector. And he also served for 10 years as an active duty U.S. navy Cryptologic Warfare Officer.
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Honorable Catanazzi, that was a long intro,
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but got to celebrate all the great stuff that you've done and welcome to the podcast.
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Thanks Billy. I'm thrilled to be here. Thanks very much for the intro.
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Absolutely.
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And you know, I'm very excited to dive into the way you're helping lead the defense industrial base from a policy perspective. And you know, a lot of what we've seen lately has been this shift from capacity to resilience and speed, really kind of meeting the moment and being flexible and agile. So I'd be curious, you know, in your role, the time that you've been in it almost a year now, maybe a half a year.
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Where do you see that? Six months, Billy. It's been six months. Yeah, I had to hang around and wait for confirmation for six months too. So that doesn't count.
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Sounds like the worst. But in those six months, you know, that shift, I'm curious where you see the biggest structural bottleneck today. Is it capital, workforce, supply chain visibility, or something else that you're most focused?
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Billy, It's a great question. I think quantifying it can be a little bit difficult because we have so many dimensional challenges associated with ramping up capacity. There's certainly a workforce challenge which is an enduring problem for the country. Right now we have, you know, approximately 400,000, we think, jobs that are open in the defense industrial base on the way to something like 2.5 million over the next 10 years. And that reflects a broader structural challenge of engineering and skilled trades. Gaps across the country that will need to close as we think about re industrializing and building the resilience you talked about. But we also have substantial gaps in the capacity of the supply chain. That's a result of 20 years of failure to invest in demand signals and structural capacity availability for the future. The market that we have now today is essentially dependent upon kind of lot to lot buys and sort of an uncoordinated flow of demand across the department. And what we're really trying to do is stabilize the demand signal with these much longer contracts, much higher volume, that should hopefully provide plenty of stability for everyone to invest and hire. One of the things we actually have a fair amount now is capital. We've seen in the past kind of five to eight years. Twenty years ago we tried to go ahead and get Silicon Valley to invest substantially in defense and they just weren't interested. They were sort of pursuing other endeavors. And in the last kind of eight to 10 years, we've seen that change. We now have a lot of private capital, whether that's U vc, your private equity firms, other parties from Wall street that are interested in investing substantially in the defense sector. So we finally have the kind of access to capital that we've always wanted. And now with, you know, sort of national security issues rising to the fore, you're seeing new players from across the private capital ecosystem. Family offices, banks, institutional investors that are interested in taking the time to learn about how they can include additional defense investment as part of their portfolio. So we also have that coupled with a recognition that we have substantial demand issues and sort of fundamentals for the economy that's the minerals and kind of materials investments, which are multidimensional. They're not. They don't tend to be just serving defense needs, they tend to serve broader industrial needs. But given the fact that they're core to everyone, we're seeing a lot of interest in those investments as well. So I think we're at the point where there's finally enough capital for us to go ahead and bring in and crowd in additional opportunities to complement all the funding we get from Congress and the taxpayer to meet our requirements.
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It's just a fascinating variety of different
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areas that you have to focus on. You mentioned critical minerals. And obviously with all of the capital that's coming in, there's also, particularly from the VC side of things, there's this focus on the new and emerging tech. And that's something that our listeners are acutely aware of. We're seeing tons of software, AI and autonomy investments and those become more critical like other traditional manufacturing elements in the defense industrial base. So I'm curious how your office is redefining the industrial base to kind of think of those new and non traditional players within that, especially software firms that don't see themselves as pure defense contractors. So how would you characterize that ongoing transformation of the DIB as sort of an evolution from the post Cold War consolidation that largely defined the space for the past few decades?
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Great question and a terrific opportunity for the department moving ahead. So as I mentioned before, back in sort of 2005, 2010, we asked Silicon Valley firms to come play in the defense sector and they just really weren't interested in. That's shifted and now they've turned up in spades. There are many companies they've turned up with great firms, great products, incredible talent, well capitalized, and they want to play and they want to play big in the department's plans for the future. It's an incredible opportunity for the department then to consider the options for whether or not they invest with sort of, you know, traditional primes and legacy players within the supply chain where they start to take advantage of these new capabilities that these firms are offering, which are often done at a differential cost model. They're done from different locations, they're often done with different technologies and supply chains. Software in particular is a place where we're excited about the ability to apply it. And all you need to do is Google how we're using AI and the various tools that are out there to improve our targeting, our ability to conduct the current combat operations in the Middle East. I'll also say that we're reflecting that in our operations. We've actually named what was our Office of Small Business Programs, the Office of Industrial Based Growth. And it really becomes growth because what we want to do is focus on not just small business, but also the new entrances that may not be small, they may technically qualify as small, but many of them have substantially capitalized and have a lot of employees. So it's all these, the new firms you've heard about. We want to make sure that our office and our operations reflect the ability to bring those firms into the department's ecosystem for the future. And it's a great opportunity. We're spending a lot of time thinking about what it means for the capabilities that we need to bring. So we recently launched in January the Lynx software project, which is a suite of tools which are intended to allow new entrants better access to the understanding of how to actually get into the defense ecosystem. Do the requirements work through their cybersecurity, CMMC requirements and actually understand how to better target their capabilities to a defense buyer. And so we're really excited about what that means for the future.
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That's fascinating.
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And it sort of ties in, I think, to another element kind of turning that on its head. You mentioned earlier in the conversation trying to wrap your arms around the defense industrial base to understand what it really is today. And I think one of the persistent challenges of any large enterprise, but I would imagine the same for years, is sort of that real time visibility into what the supply chain is and who the vendors are. So thinking about that same software or like the data focus of those vendors, I'm sure your office to some degree is, to some degree is trying to kind of expand its own data driven picture as it relates to the industrial base. So I'm curious what progress you might have made there with some of the new capabilities that are out there today and what are the biggest gaps that might still concern you based on the data you've seen?
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Sure, it's a fantastic opportunity for us. In fact, Undersecretary Duffy, my boss, has been made digitization and the use of digital tools, software, the data backbone for the enterprise, one of his priorities. And so I'm really excited as a person that's worked in software throughout my life and as an engineer, to be spending time thinking about how to take these digital tools and the capabilities they offer to build an improved picture of the industrial base. The kinds of capabilities that we have are fantastic. There's visualization tools, we have plenty of access to analytic and machine learning capabilities and now with the advent of artificial intelligence and large language models, but also large quantitative models, we have the ability to apply these capabilities in a new way. I think the challenge has been the scale of the industrial base is massive, massive. If you think about the number of firms that are out there, I mean, certainly at the prime level there's a limitation. But we have thousands and thousands of programs scattered across the country. We have supply chains that span our allies and partners, we have buyers that spanned allies and partners and all across the defense ecosystem, well into to the intelligence ecosystem and often into our interagency partners. And there are thousands of companies doing things oftentimes buried in the supply chain. So it's really a matter of cleaning up the data and bringing together. And that data needs to come from lots of different partners. We've got great agencies like the Defense Contract Management Agency, which actually has 18,000 government civilians and contractors that work every day at the factory floor actually mapping and solving industrial problems, bringing together their insight with commercial best practices and, and insights that are available from open source intelligence from querying other government data and then the actual program data themselves, that is the peos and PMs that own and buy these, these products. Fusing all that together into a coherent view is a non trivial challenge, but it's something that people have been at for a while and I'm excited that we're, we're actually accelerating that work, but not just to build the picture, but it's really around the decision model and the decision rights that enable us to go ahead and make smarter, take smarter activity and invest. And I'm excited that our office has been encouraged and empowered by the Congress and funded to go ahead and actually work on some of these supply chain issues. And so we have a very robust team of experts, engineers, scientists, analysts that actually looks at these models, looks at these supply chains and sort of identifies choke points and gaps. And we have the resources to actually go ahead and dive right into it. That is to say, we can take a company, we can break them down, we can work with them and say what will it take to help you increase capacity two or three times? And to do that on a timeframe that's actually really relevant to what the customer needs, that is to meet the requirements for the warfighter and it's a real opportunity for us to, to not just have better visibility, which is important, but to really put it into use. And that's really the, where the outcomes are.
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That's tremendous.
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You know, I'm curious as we have
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that conversation and There's a lot going on in the world right now, and I know that rebuilding the defense industrial base is clearly a top priority for the department. What are you seeing in terms of industry leaning in? As you sort of look across the gamut, you get a sense of the data that's out there. Where are you seeing industry really lean in on capacity and production expansion?
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Sure. So we've seen in the past couple of months these sort of extended volume, higher, higher volume, longer range, long term, multi year procurement contracts that the Congress has authorized us to pursue. These are fantastic. And we've seen great partnership from the primes to get these contracts initially for munitions cleaned up, organized and ready to execute. That reflects a real commitment from the companies to national security and to the need for them to invest to increase their own production capacity. So these are not, you know, the companies are making, you know, small and regional reasonable investments year on and year out. They're hiring engineers, they're buying capacity, they're investing in facilities. These kind of investments are transformational and represent substantially increased, sometimes two orders of magnitude more investment than they've made in the past in these kind of programs. And so we're really excited to be stimulating their interest in serving our requirements. We're eager to be working with them to de risk their delivery. That is us partnering with them, then providing additional detail that they've, in many cases, I think they haven't shared in the past, at least not easily, so that we can understand where their problems are, not just in house, but also in the supply chain. That allows us then to go in and invest our resources and talent to help de risk their delivery. So we're actually making them more successful as manufacturers by allowing us to work with them closely. To say, like, this is how we can help you. Here's a program, here's a capability or a sub vendor where we can invest some time to help them make it more efficient for you to deliver to us. And so we're doing that gratefully and in partnership with them. And it really reflects the change. And I think more broadly, we're seeing a lot of interest as the national security issues ramp up, particularly the current combat operations. But I think it's really been since the beginning of the administration that we've talked a lot about the need for change, the need for transformational shift in mentality, and, and the department has talked about moving to a wartime footing since last spring, before I came on board. And that's really the consistency of that. Messaging from Secretary Hegseth from the White House around the need to do this from Deputy Secretary Feinberg and Under Secretary Duffy has really reflected in the way that when we approach the companies, they understand it now, they understand the urgency with which we're approaching the problem. They accept the fact that we are asking for a lot. And, and they're coming not with an attitude of, you know, sort of pushing us back or wanting to slow down. They're wanting to know how they can help ramp up. And I think that's an incredibly important mind shift for everyone involved in the sector. It's not 100% complete. We continue to emphasize that we continue to communicate, go to conferences, go to companies and make sure that we're reinforcing that message so that it really gets in. But I think it's, it's an important shift in the way that firms are thinking about the problem.
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Speaking a little further from that, and I'm curious, a lot of the discourse when it comes to commercial innovative technologies is that they're largely there. It's just often a preeminent problem in the government or in the defense space to actually adopt them in a timely manner based on the bureaucracy and other acquisition frameworks that can optimally be. Be pretty burdensome. I'm wondering how much that kind of gets into your arena as you work with the industrial base and if so, how you would quantify that and what you might be doing to work towards chipping away at that timeline so that that adoption can match the rate of commercial innovation a little bit better.
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Sure. The acquisition transformation strategy that Secretary Hegseth announced in early November I think represents the summation of a lot of the things that you've talked about and I discussed before, which is a whole bunch of great ideas about how we can go ahead and get more from industry, both the old legacy industry and the current new primes. Neoprimes, however you view them, as well as the folks in the supply chain that offering new capacity to us. And I think the reason why is because it reflects not just good ideas. I mean, there are a lot of new things in it, but I think more than else, it represents things that people have talked about for a long time. Additional stabilized demand, more reflection of commercial buying practices, less requirements, a more streamlined qualification and certification. So bringing all those points together into one framework is incredibly important. But it really is, I think more than anything else, a leadership driven change. That is from the White House on down, we have this being a priority. That is these ideas need to not just be talked about, they need to be executed, they need to be resourced. They need to be driven down into the programs, to the contracting level and to the primes themselves and to the companies below them to say that we can do this in a better, faster, cheaper, more effective way if we just spend the time for the leadership to say it's okay to take risk. And I think that's been at the heart of the challenge here, is that we have an incredibly talented workforce. I have to tell you, as a, as a citizen, sometimes we criticize the government and the bureaucracy and those kind of things. And when you come in the door, you're reminded just how many talented and amazing people are working every day on the active duty side. And our government civilians, the contractor workforce, many of whom could go off and do other things in the private sector, who could probably make more money. But they do this because they're committed to the problem. They're committed to solving national security issues. They're committed to making a difference for the warfighter and making sure that we're solving national security problems. And so encouraging them to take risk and saying, I've got your back, which Secretary Hegseth and the team have said since the beginning, we've issued EOs, we've issued directives, we've encouraged leaders at every level to say, taking advantage of these tools and capacity is an amazing opportunity. We're going to allow you to go ahead and do things differently. In my talks, I often will say that we need radically different outcomes, because we do. But to do that, you need radically different processes. A lot of times in the past, it's been, you know, strategy by exhortation is the way you describe it, which is go do great things, but we can't change any of the processes, and that doesn't work, as we've seen, which is kind of where we are. I'm really excited about the fact that we've got a leadership and a team that's saying, go do great things and show me how you're going to do it differently. Right? Show me how we can go ahead and change the way that we operate, because that's really how we're going to get to those radically different outcomes. And it's an exciting leadership opportunity. But more than anything else, it's exciting, I think, and I hope, for the folks that are actually in the trenches every day doing the work, because they're finally being allowed to do things differently. And that's not everyone. And that's never going to be easy. But we're allowed to spend the time to encourage that while saying, it's okay to fail sometimes as long as you're making reasonable decisions to go fast. Not everything's going to be perfect, but in doing that, we're going to go ahead and unlock a lot of new capabilities, a lot of capacity and a lot of speed and volume. And that for us, I think is the biggest, most consistent message from our leadership, which is this is about speed and volume of delivery in the industrial base. So I'm really excited about being a part of that leadership effort as well.
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Yeah, it sounds incredibly important and sounds like a very structured and direct attempt to solve some of those issues.
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Honorable Kadanazi, as we close out, you
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know, we've talked about quite a lot in this discussion and I'm curious, you know, looking three to five years out,
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what you are most focused on?
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Obviously you're taking it one day at a time and doing what you can to sort of support and sustain that future. But as you look several years out, what are the things that you want to make sure you take care of today and into the future to better secure and sustain the industrial base?
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Fantastic question. I think in my mind there's a couple of key areas where I think the department can make a difference. First, in munitions. And this isn't just about the current fight. It's around an enduring requirement for us to make sure that we meet the combatant commander's requirements to have enough weapons at enough readiness levels to make a difference. And so for us in our role in industrial based policy, we have the privilege of working on solving these supply chain issues. So first of all, I'd like to make sure that we're contributing to the ramp up in munitions, which is a month to month thing. It's like next month, hopefully we'll get one or two more units than we did last month. And you know, in six months from that, we should see a step function as we start to put in new capabilities that we've invested in. That's really important for me. Second, I think we're working on the minerals and strategic materials issues. Look, I didn't, I don't think any of us came into the job thinking we're going to spend as much time as we did on minerals. I spoke with my predecessor from eight years ago, ten years ago, and he basically said he spent, you know, 5 to 10% of his time on this issue. Over 50% of my budget is allocated into minerals initiatives, which is not something you'd expect for the department. But we recognize the need to help sort these as part of a whole of government effort to go ahead and make sure that the industry has access to the critical materials it needs to go ahead and ramp up capacity. Because you can have a lot of dreams about additional units at the factory floor, but if you're lacking in germanium, gallium, yttrium and rare earths, you're really going to struggle to go ahead and meet those requirements. So we have a fundamental need to unpack that. And then the last thing for me is around workforce. We invest in 41 separate workforce programs within industrial based policy alone. We're excited. This spans work from Hawaii to Virginia, from Michigan to the Gulf coast, and for me, I think it's an incredible opportunity to help shape the amount and in fact and influence the understanding that skilled trades are a critical part of our industrial base. Not just the defense industrial base, but our national economic vitality. And if we can do more to help bend the needle or move the needle in terms of folks wanting to go ahead and pursue these careers as a viable path for the future. And that really starts even in elementary school and middle school, which is getting kids excited about the possibility of being in a trade where they work with their hands and work with the machines that actually bend metal for the future. That to me is a tremendous thing and I'd love to know that that we're making a difference over these next couple of years.
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It's fascinating stuff and you hear so much about it, but you really put in perspective why it's so important to the department. So I thank you so much for that and for your time today. It's a fascinating look into how important the industrial base is to everything that's going on in the department today. So honorable Kadanazi, thank you so much for your time.
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My pleasure, Billy. Please know your industrial based policy team is working incredibly hard on behalf of the warfighter. Help this wherever we can and we look forward to partnering with you again and with our friends across the services to do better. Thank you.
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For more on the evolution of the defense industrial base, make sure to visit fedscoop.com
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thanks so much for tuning in
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to another episode of the Daily Scoop
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Podcast, available on all podcast platforms. If you've already rated the podcast on your platform of choice, thanks so much. High rate ratings and good reviews of the show help more people to find it. The Daily Scoop Podcast is a production of the Scoop News Group in Washington, dc. Adam Butler and Carlin Fisher help put the show together and the entire Scoop News Group team contributes. We'll be back tomorrow with more top headlines until then I'm your host as always, Billy Mitchell.
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Thanks so much for listening.