Neglect of small business at the start of WWII

… little actual headway was made in 1940, primarily because the Army and Navy field procurement officers had been sharply reminded, in the course of numerous investigations, of their individual responsibility for fulfillment of the contracts they placed, and because there seemed less opportunity for assuring completion of a contract in a given time if responsibility were disseminated widely through small prime contractors and subcontractors… Of the more than $11 billion in prime contracts awarded by the Services during the seven months from June through December 1940, 60 percent went to 20 firms and 86.4 percent to only 100 companies.

That was from “Industrial Mobilization For War,” HISTORY OF THE WAR PRODUCTION BOARD AND PREDECESSOR AGENCIES 1940 • 1945. Volume I PROGRAM AND ADMINISTRATION. BUREAU OF DEMOBILIZATION, CIVILIAN PRODUCTION ADMINISTRATION.

Eventually, small business was engaged. But it wasn’t just because Bill Knudsen and others coordinating the early stages of industrial mobilization were giving contracts to their pals, though that certainly was also a factor. Regulations incentivized contract officers towards a smaller number of orders with the largest of firms to minimize their personal risk. Spreading numerous order across several contractors vastly increases the chance that at least one of them will not perform or be seen as nepotism. Perhaps there’s something similar going on during Covid-19, because we see massive hundred million dollar contracts for ventilators and masks to select firms rather than engaging the broader industrial base.