This entry is a subentry of Procurement.
Military procurement necessarily stands apart from the mainstream of the American economy. This owes partly to the uniqueness of much military equipment, which requires special design, development, and production facilities, and partly to the military's mobilization needs, which often dictate maintenance of reserve production tooling and supplies. Uniqueness has grown more significant with the advance of technology, and especially with the American military's Cold War push for technological superiority. Military mobilization needs have grown less important with the invention of nuclear weapons, which made a long conventional war inconceivable, and with the development of conventional weapons too complex to be produced rapidly in any case.
Neither of these factors explains why the American military buys even simple things in complicated ways, however. While reports of $465 hammers, $10,000 coffeemakers, and sixteen‐page technical specifications for sugar cookies prompt cries of fraud or stupidity, more often they result from the fact that defense is a public good, financed by a large federal bureaucracy dispensing public money advanced by a pluralistic political process.
Historically, military procurement has involved three major sets of arrangements, in proportions that have changed over time. The simplest arrangement has involved the purchase from commercial vendors of commercial items, perhaps slightly modified for military use. This was the principal mode of military procurement in the early years of the republic, when military technology differed little from the muskets and saddles people normally owned. The procurement challenge then lay in meeting the military's need for large production quantities and interchangeable parts. As weaponry has grown more sophisticated, the military has moved to other modes of procurement. But today's military still buys office supplies, computers, and some motor vehicles from commercial vendors.
The development, production, and maintenance of military equipment has also been carried out by government‐owned laboratories, arsenals, and depots. The “arsenal system” originated early in the 1800s and grew over the following century into an elaborate array of specialized facilities. Arsenals contributed production techniques as well as weapons; work on mass‐production techniques at the Springfield and Harpers Ferry arsenals, for example, contributed to the nation's initial industrial development—an early example of so‐called spin‐off, wherein defense research produces items of commercial value.
But the arsenals also became famous for their stodginess and resistance to technologies they did not themselves invent—the “not‐invented‐here” syndrome. As technology became more important to military power, the arsenals came under increasing attack. Most of the original arsenals were closed in the twentieth century. Although some labs and depots still operated, these too were disappearing, or at least shrinking in size, as the defense budget fell and the military services “outsourced” such activities to private firms or operators. Although a new set of government‐owned facilities grew up during and after World War II to develop and build nuclear weapons, with the end of the Cold War the nuclear weapons facilities too were shrinking and scrambling for new missions.
The most pronounced break with the older arsenals came in the years just after World War I, as the services sought to explore the new aircraft technologies demonstrated during that war. Government arsenals were unable to keep up with these relatively fast‐moving technologies; in the time it took a government facility to draw up specifications for a new aircraft engine, for example, still newer models would render those specifications obsolete. The army and naval air arms thus turned to the era's aircraft entrepreneurs, who were eager for government contracts to help finance their fledgling companies. Contracting procedures were complex and never wholly satisfactory, since the exploratory nature of the work made it almost impossible to specify costs in advance, or to run formal competitions against established specifications. Thus, there was far more prototyping than actual production of aircraft in the interwar years. Still, almost all of the aircraft used during World War II were prototyped by private aircraft firms before the war began.
The Cold War saw a massive expansion of this mode of military procurement, stemming partly from the importance of aircraft and missile procurement and partly from the presumption that these firms were far more innovative than the arsenals. In the 1960s, for example, Secretary of Defense Robert S. McNamara forced the army to shift from what remained of its arsenals to private contractors for much of its procurement. During the Cold War, military procurement came to be highly concentrated in such large aerospace giants as Boeing, Lockheed, and General Dynamics; normally, the top twenty‐five defense contractors won nearly half of all procurement dollars awarded annually. It was this form of military procurement that President Dwight D. Eisenhower referred to as the “military‐industrial complex.”
What worried Eisenhower was the political clout such firms seemed to wield. The pioneer aircraft entrepreneurs excelled at lobbying Congress as well as designing innovative aircraft, and thus managed to pull down more than half of all military research and development money allocated in the years between World Wars I and II. Lobbying activities grew in the 1950s. Although the arsenals had always maintained close ties to their local legislators, commercial firms could lobby more aggressively. They could also spread the award of subcontracts widely, at least partly to seek broader political support on Capitol Hill. Although the literature on defense contractors questions the effectiveness of these tactics—permanent installations like arsenals or depots seem always to have had more clout with legislators—there is no denying a political dimension to defense contractors' activity.
The political nature of their market slowly shaped these “private” firms into a form more properly labeled “quasi‐socialized.” Lacking the competition or price signals found in a real market, and facing steadily growing government regulation, defense firms generally acquired layers of bureaucracy that mirrored the military bureaucracy they served. Commercial firms owning defense facilities have tended to keep these divisions quite separate within the firm, for example, if only because defense accounting techniques differ substantially from those used commercially. More important, the military's drive for technological superiority slowly pushed many defense firms to levels of technical sophistication well beyond what could be marketed commercially. As defense spending fell in the wake of the Cold War, few defense firms were able to “convert” to commercial production except by simply buying commercial subsidiaries. Thus, the nation's defense giants sold out (General Dynamics), purchased their way into commercial sectors (Rockwell), or merged into huge defense conglomerates (Lockheed‐Martin, Northrup‐Grumman).
Americans want these firms to be both efficient and creative. But no one can measure their efficiency, since no one knows what the world's best fighter aircraft or tank “should” cost (although one credible study comparing the cost of U.S. and European military aircraft concluded that American weapons cost more but performed better). On the other hand, these firms have clearly been creative; in the nineteenth century, U.S. military technology often lagged behind Europe's; during the Cold War, it moved into first place worldwide in many categories. Overall, Americans seem to have paid a premium for premium technology.
Yet it remains to be seen whether the dominant Cold War mode of military procurement can handle the challenge posed by modern information technologies. Like aircraft technologies in the 1920s, today's electronics technologies have military utility but are advancing much faster than the established procurement apparatus can handle. Thus, the commercial world now leads the military in many electronics sectors, and defense procurement reform seeks to forge links from its own process over to commercial electronics firms. Procurement routines are deeply ingrained and difficult to change, of course, raising questions about whether such reform will succeed. If it does, it will shift the mode of military procurement back toward the early years of the republic: the purchase of military technologies from commercial vendors.
[See also Industry and War.]
Bibliography
- Merton J. Peck and Frederic M. Scherer, The Weapons Acquisition Process: An Economic Analysis, 1962.
- Thomas L. McNaugher, New Weapons, Old Politics: America's Military Procurement Muddle, 1989.
- Kenneth R. Mayer, The Political Economy of Defense Contracting, 1991.
- Paul A. C. Koistinen, Beating Plowshares into Swords: The Political Economy of American Warfare, 1606–1865, 1997.
- Paul A. C. Koistinen, Mobilizing for Modern War: The Political Economy of American Warfare, 1865–1919, 1997.
- Paul A. C. Koistinen, Planning War, Pursuing Peace: The Political Economy of American Warfare, 1920–1939, 1997
