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Devaluing the Concurrency

10:10 AM, Oct 27, 2011 • By THOMAS DONNELLY
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But defense industry analyst Loren Thompson more accurately explained the immediate effect to Reuters: “If the government succeeds in shifting the ultimate risk…then it could easily wipe out any profit on the program and leave the company unprotected against future liability.” Only in the Defense Department can you ask a someone to invent an airplane unlike any previous airplane, change your mind repeatedly about what sort of airplane you’d like, change your mind repeatedly about what it “should cost,” and then hold the inventor liable for all the changes and expenses. Now that’s procurement reform!

While it’s politically expedient to beat up on defense contractors – the “military-industrial complex” commands very few votes these days – it makes for very bad policy.  Even when weapons programs aren’t “highly concurrent,” they rest upon trust that goes beyond the letter of the contract. And as Lockheed, which is pushing back against the proposed shift in cost-sharing, well knows, its ability to attract public capital will be crippled if it’s forced to eat the costs of both its mistakes and the Defense Department’s.  Punishing Lockheed in this way will send a chill throughout the industry. The ultimate result would be to weaken the entire system that has ensured the predominance of Americans on future battlefields. The defense industry is hardly a case of pure capitalism, but it has proved to be far better than any state-run arsenals, particularly when it comes to innovation. 

And for dumping all the development costs onto contractors will only exacerbate the government’s worst habits. The majority of cost growth and schedule problems in acquisition programs stem from decisions made by the government – changes in requirements, unstable funding patterns and the like. This “reform” would allow the Pentagon to play exclusively with house money, and incentivize it to play longer odds.

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