Whither Us Defense Contractors?

Dov S. Zakheim and Ronald T. Kadish, senior executives at Booz Allen Hamilton, the government and defense consulting firm, have written a blistering editorial criticizing the defense consolidation of the 1990s, and the role of the government, in particular the Clinton administration, in encouraging this.

While I agree with their assessment of the facts, that there was an extraordinary level of consolidation in the 1990s, and that no savings have yet materialized, and that defense procurement is an over budget and behind schedule mess, I disagree with their basic thesis, that somehow deconsolidating the defense industry will help.

These moves highlight an unfortunate reality: The United States is approaching an "arsenal system" for developing and producing its weapons -- that is, one in which the government manufactures its own weaponry. It's an antiquated model with modest benefits, but the way things are going even those will probably be lost.

I have worked off and on in defense since 1992, and I have not seen any significant change.

With the US government spending more than the rest of the world on defense, it means that we are merely seeing the consequences of an effective monopsony (single buyer market, the reverse of a monopoly).

We already have a market without meaningful competition, and when you have for profit institutions without competition, you do not save money.

What's more the self-dealing, how many retired generals work for defense contractors after, and other corruption and pork barrel aspects to not bode well for the future.

I'm not sure how to fix this, but the use of private defense contractors is not working, so perhaps an arsenal model will work.

I will note that the one part of the Soviet economy that produced reasonable quality products efficiently was their defense industry, which was precisely the arsenal model that they disparage.