There is no doubt that, Pentagon Labyrinth is a first rate piece of work. However it did fail to mention an additional factor in defense procurement costs that is often overlooked and that is the need to subsidize U.S. defense industry giants such as Lockheed Martin, Northrop-Grumman and General Dynamics. This also explains the over elaborate use of sub-contracting since the boutique sub-contractors used by the defense giants often produce key components for weapon systems so also must be given a portion of the subsidies. Boeing is the only major defense contractor that even makes a pretense of also dealing in commercial aircraft. Lockheed, Northrop, and General Dynamics along with their networks of sub-contractors are virtually entirely dependent on government contracts or contracts from the government’s foreign clients for their continued existence.
For strategic reasons the Pentagon feels that this intricate system of subsidies in the form of contracts is required to keep the production staffs (such as hard to replace engineers and craftsmen) and production facilities of defense contractors and sub-contractors ready to ramp up with minimum delay. Since the Congress insists that these contractors must be private companies capitalized by private means they have to continually attract investors.
Indeed Ashton Carter, DOD Under Secretary for Acquisitions, Technology, and Logistics recently went before an assembly of Wall Street analysts to assure them that investments in the aerospace industry will make good sense even with DOD cutbacks. This of course was a thinly disguised promise that the Military would continue to subsidize the aerospace industry through big and small contracts.
This has got to be the most inefficient method known to man to operate defense industries. The argument that there needs to be needs to be competition among the defense industry giants so the Pentagon can get the best price is a fiction. The spoils of any contract are usually shared among them one way or another and bidding is an empty exercise thanks to such things as cost plus clauses always included in the contracts.
Personally I find the thought that my tax dollars are being used to prop up defense giants so that their Wall Street investors can make a profit very strange indeed.
Phi Beta Iota: Chuck Spinney has long focused on the pathological effect that “government specifications cost plus” have on the entire engineering community, generation after generation. Now, however, in the aftermath of the Wall Street debacle and the loss of integrity of the US Government being so evident, it is helpful to remind one and all that false patriotism is the refuge of scoundrels, and anyone who says the Pentagon budget cannot be cut by 50% to 70% over the next five years is either uninformed, or part of the criminal conspiracy to continue defauding the taxpayer. The same is true of the secret intelligence community ($70-90 billion) and the “homeland security” community (a like amount), and the health and justice communities (both *at least* 50% waste and closer to 70%). It also merits comment that Bob Koehler, then of TRW, was correct when he told the government in 1995 that secret satellites were unsustainable in this fashion, and that only a robust commercial satellite industry could keep the actual skill sets and economies of scale going. Robert Steele said the same thing about secret intelligence (both spoke at the SASA annual conference in the NSA bubble), but the first suggestion translated into additional profits for the military-industrial complex, while the second would have called into question two thirds of the secret intelligence budget that is wasted on secret technical collection that is not processed, not analyzed, not useful, and not affordable.