Why does US defense industry fail in “normal” times?

Here is Fredric Scherer discussing why the US defense industry seemed to perform so well in urgent programs of the 1940s and 50s, and so poorly in normal times:

We know from historical experience that when the chips are down, as in World War II and in cold war programs of maximum urgency, the US defense industry has performed superbly. Why then do we fare so poorly under “normal” and “sub-normal” conditions?

 

The difference turns not merely on a lesser sense of urgency, as is sometimes suggested. Rather, the resource utilization incentives are also different. 

 

During World War II, there was more to accomplish than there were resources at hand. The attitude of the contractors was, “How much can we do with what we’ve got?” A similar philosophy was evident among contractors in the most efficiently conducted 1950s programs studied by my colleagues and me on the Harvard Weapons Acquisition Research Project.

 

But when the pressure is off, and especially when there is a general surplus of defense industry resources relative to program demands, the characteristic attitude is, “What in the world can we do to keep our existing staff busy?” Then cost controls falter, gold-plating and excessive complication set in.

Could you imagine a weapons research project at Harvard today? They produced one of the all-time great books on weapons acquisition: The Weapons Acquisition Process: An Economic Analysis (1962). That quality of scholarship in this space is scarce today.

Scherer recommends a radical change:

… [contractors] must somehow be induced to maximize output given their limited resources, not to maximize the quantity of resources they can spread over a restricted array of programs.

Of course, I recommend an organizational budget. Technology labs, PEOs, and Combatant Commands would then maximize within their fixed budgets, rather than fighting each and every year over the size of their programs.

Source:

“Weapon Systems Acquisition Process” Hearings Before the Committee on Armed Services United States Senate, Ninety-Second Congress, First Session, December 3-9, 1971.