It isn’t a con at all. It’s the result of the unbelievably arcane and complex defense acquisition rules. It’s nearly impossible to move fast and save money with smaller companies due to all the hoops they have to jump through to get on contract, so only large corporations can handle all the paperwork making anything at all cost way too much money to pay for all the overhead.
The con, if there is one, is large defense contractors convincing non-technical officers that highly technical things will be super duper hard and needs to be on a cost-plus contract to take into account any unforeseen issues. I sat in a meeting where one of those mega-corps said with a straight face that they needed a cost-plus contract to cover any losses from the additional inflation… on a one year contract.
Depending on when it was inflation could drive their costs up 3-5% over a year. When your margins are basically fixed by the govt at 12%, it makes sense to cover as much cost as they can.
The whole incentive structure is messed up because the govt “runs” defense companies like they are state owned without actually just making them state owned, or just letting them actually be private.
It isn’t a con at all. It’s the result of the unbelievably arcane and complex defense acquisition rules. It’s nearly impossible to move fast and save money with smaller companies due to all the hoops they have to jump through to get on contract, so only large corporations can handle all the paperwork making anything at all cost way too much money to pay for all the overhead.
The con, if there is one, is large defense contractors convincing non-technical officers that highly technical things will be super duper hard and needs to be on a cost-plus contract to take into account any unforeseen issues. I sat in a meeting where one of those mega-corps said with a straight face that they needed a cost-plus contract to cover any losses from the additional inflation… on a one year contract.
Depending on when it was inflation could drive their costs up 3-5% over a year. When your margins are basically fixed by the govt at 12%, it makes sense to cover as much cost as they can.
The whole incentive structure is messed up because the govt “runs” defense companies like they are state owned without actually just making them state owned, or just letting them actually be private.