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Apr 13, 2022·edited Apr 13, 2022

I work in the humanitarian sector and at a previous job did a lot of software contracting with USAID projects. It was basically impossible to structure any of the contracts in a way that produced good software at a fair price – in fact, we often produced software that wasn't used, was overpriced, AND we somehow made a loss on it. It's no individual's fault in the contracting chain but the end result is basically insane.

We tried to get away from the cost-plus ('time and materials') model to just paying us a fixed price for a product, but that just led to constant back-and-forths on whether things really matched the requirements and what was a new feature request etc. etc. Ultimately cost-plus was safer for both sides, but it rarely resulted in good software. I work in the same field, but with a much better, non-government structure now. I think military contracting largely functions like USAID, and it's so difficult to fix how it works.

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Apr 13, 2022·edited Apr 13, 2022

I'm not in the field directly but I do pay a fair amount of attention to discussions around this (and, as a lawyer by trade, I deal with plenty of contracts in the private sector) and your description strongly matches how the more informed discourse always goes whenever abandoning cost-plus comes up. Again, I can’t speak to directly lived experience (beyond abstract contracting issues) but I hope I can summarize what I hear from people who do have it:

(1) Problem: We spend tons of money on government contracting for far worse product-per-dollar than the private sector does!

(2) Related, Seemingly Tractable Sub-Problem[*]: with cost-plus contracts, we're paying for inputs instead of results, which creates a huge incentive disalignment and is basically asking for agency costs.

(3) Proposed solution: get rid of cost-plus contracts!

(4) Problem with proposed solution: once you get rid of cost-plus contracts, the risk shifts from companies fleecing the government under cost-plus to the government (de facto) fleecing the companies. In particular, because basically every contract in the history of ever (particularly development contracts) is under-specified[**], you’ll predictably get buried with change requests that run the risk of swamping your budget projections and timetable unless you place some kind of damper or compensation mechanism on them. While hypothetically you could avoid this by putting in an appropriately highly-priced flat bid with enough budget contingencies in it, the bid itself would be have to be astronomical because you can only go so far in predicting what the magnitude of these change requests is going to be for any given project.

(5) While the problems with (4) might seem soluble with a sufficiently good set of goal-oriented milestone constraints or a demand that the companies just do their best with a flat bid, that doesn’t account for the risk that the *constraints or goals themselves* may change unpredictably during contracting. The enemy comes up with a new material, tactic, or purchase contract, or field experience with the prototypes reveals that your system is too heavy, and all of a sudden you’re shooting for a target 20-50% harder than what the government initially thought it wanted. Note that this can reasonably occur even with the best of intentions and good faith on all sides.

(6) Between experience getting burned on points (4) and (5), their own incentive structures, and the huge amounts of work it takes just to submit a bid, eventually the market settles out to where the primary participants are huge well-connected and well-capitalized defense contractors who hold the line on cost-plus contracting not only out of pure greed but also—at least to a certain degree—economic self-preservation.

(7) End result: everything takes too long and costs too much. Because of the monopsony or near-monopsony buyer situation it’s incredibly hard to let market efficiencies grind all the transaction costs out and we just go back to Step (1).

The bottom line on government contracting thus always seems to come down to the proverbial Unstoppable Force meeting the Immovable Object:

(1) Government contracting is astronomically expensive and gets terrible bang for buck relative to the private sector, to the tune of truly mind-boggling amounts of money effectively wasted

(2) Government contracting is a Very Hard Problem to Solve.

[*] Others include, e.g., the difficulties of bidding and the way in which this naturally coalesces around a small set of providers versus the fact that due to very real nepotism and favoritism issues we have to treat contracting strictures like rules instead of guidelines.

[**] As a lawyer (this is not legal advice yada yada), just trust me that this is essentially true, that there are good reasons that contracts are under-specified, and that not only is this essentially unfixable but there are good reasons that it wouldn’t necessarily be a good idea to *try* to fix it ex ante, particularly because it’s very expensive to pay people like me to try to draft and revise contracts. In particular, there are reasons that goods and services are iteratively improved.

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so I'm currently revising a journal paper about a baroque contracting tool for purchasing solar on federal sites and I was curious to get your thoughts on a way I'm interpreting my interview subjects.

This contracting vehicle inserts some lifecycle uncertainty into the purchase of these power generating assets (how isn't totally relevant) on the civilian side, my view is that federal project managers have to interpret any uncertainty in cost essentially as it's highest plausible value. I think the reason this happens is that funds are appropriated, you don't actually have any flexibility, so you have to build that flexibility into your initial ask which raises costs. Similarly, the benefits for coming in under are tiny compared to the hassle of having to run to congress to beg for more money or checks not going out

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There are a similar set of problems with public transportation, and the best experts (e.g. the Transit Costs Project) seem to have come up with the conclusion that the right answer is actually not to have high-level contracts at all, but instead to have in-house design expertise and then have large numbers of smaller contracts to do actual construction (so you come up with a set of engineering drawings for a bridge and then get a contractor to construct the bridge; if they encounter a problem, e.g. the ground isn't as expected, they can work with the engineers and architects you have in-house to resolve it and agree a price).

In software development, the equivalent is probably hiring developers on short-term contracts while keeping all the architecture/design expertise in-house.

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I think I’d agree with that. If that setup isn’t in place, your program/project is ripe for consultant capture.

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Yes, a lot of military leadership (I think Gen. Berger of USMC most recently) have made the point that the broken procurement process is fundamentally one of the military's biggest problems.

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I've spent most of my career at large software companies rather than corporate IT, but AFAIK large scale contracted bespoke software systems rarely work in the private sector either.

Much more common models I'm aware of are:

(a) Contracts to customize an existing system, which is a much more tractable problem; or

(b) Contract labor paid cost plus, but under the supervision of company staff.

(a) obviously doesn't work without a thick enough market; and (b) is probably not viable without the government being able to pay market comp.

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In my experience being a defense contractor (and not) the main thing that has dragged down projects is a bad or nonexistent prototyping process before the final contract awards are determined. That and loss of high value personnel. Having your main engineer poached by a higher paying commercial entity in the middle of a contract is devastating. Assuming the staff remains intact, interaction with the end users to do proper user interface and workflow modeling makes it much more likely the project will be on budget, on time and useful.

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I'm not actually sure if there's a good example of a cost-plus contract that works out well.

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Apr 13, 2022·edited Apr 13, 2022

I don’t particularly agree with this take because if you look at the Department of Defense’s budget justification books (which I do for a living now) you’ll see a fair amount of the defense budget (& future outlays) are dedicated to military salary, retirement, healthcare and not specifically defense related military construction. A fair portion of our defense budget has very little to do with lethality or competing with the PLA (assuming that we ignore European security, which I disagree with as well).

The point that procurement is wholly broken I 100% agree with. The Ford-class carrier is an okay example but a bigger example is the botched procurement of the Littoral Combat Ships (which are being retire well before their service life, some basically new) and the Zumwalt-class DDGs (only made 3 with guns that we couldn’t afford the ammo for). Another commenter mentioned the Navy should notionally be the lead service in directing the competition against the now larger People’s Liberation Army (Navy) but the US Navy is incapable of building or developing new ships for that competition because of decades of not investing in public & commercial shipyard infrastructure. Trying to reorient the Navy & to a lesser extent the Air Force will require more money and more than the nominal 4% defense increase from last year (2% if you take out the Ukraine supplemental funding).

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I think the Navy does get some procurement things right and our subs are the envy of the world. I'm a bit carrier agnostic, but I think the specific fault you rightly identify is our ability to produce large numbers of smaller ships, be they the LCS or destroyers. We'll see how the remotely operated maritime system effort goes, but in addition to massive investment, I'd guess this is a case where we'd have to work with allies who have strong commercial shipyard capabilities to effectively reorient on that problem. (Albeit probably in an expand capabilities here with some partnership approaches, as shipyards are one of the most protectionist areas around the globe.)

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We do procurement of subs right because the Boomers (SSBNs, not the generation) are a national asset that get joint funding & oversight like the Air Force’s Ground Based Deterrent, and the Chief of Naval Reactors has a 5 year term where he sees through procurement from the cradle which is why Columbia is a relative success.

Partnering with Allies with their shipyards is problematic because of supporters of the Jones Act, the domestic shipping industry dependent on government orders, and our Allies also having a shipyard issue bc the largest shipbuilding companies are Chinese or South Korean… while South Korea is a core US ally I don’t think we’ll be depending on them for our shipbuilding needs anytime soon. Both China and South Korea are shipbuilding giants because of massive government subsidies. It’s a conundrum I don’t really have an answer for besides massive subsidies of our own.

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"...because the Boomers (SSBNs, not the generation) are a national asset...."

yeah, except the Boomers are a classic example of corruption, waste, fraud, and bloating, all based on fundamental strategic misconc --

oh, sorry, missed the parenthesis on my first read.

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Haha, right I couldn’t help but to use the military nomenclature considering this august group we have here….

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I think we probably do need to get back to significant subsidies for commercial ship production. Much ink has been spilled on the subject of the vanishing of US commercial shipbuilding and merchant marine as a huge national Achilles heel, and unfortunately it does seem to be a correct analysis.

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That will cost a lot of money to benefit not necessarily huge players…

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It will be expensive, but I'm not sure there is much of a choice. To be almost completely dependent on foreign countries to sustain our merchant shipping capability in time of war seems (at least to me) an unacceptable strategic liability, especially when we consider the precedent of the importance of shipbuilding capacity in the last major global war we were involved in.

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100% Agreed but what do I know… just a humble civil servant.

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Yeah, I think there may be some room for making some semi-conductor style deals with South Korea to help rebuild capacity in North America, but there that's only a slightly smaller pile of money, if potentially a shorter schedule. I do think South Korea could get into the production of mid-tier remotely crewed maritime vehicles in a way that could fill a niche in the larger alliance network, but one problem at the time.

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I want to point out that, quite apart from the disaster that is ship construction and procurement, the Navy also woefully under-resources maintenance, and then actively tries to retire ships early BECAUSE they're deficient in maintenance (https://navy-matters.blogspot.com/2021/03/initial-ticonderoga-retirement.html). This is also connected to the public shipyards being overwhelmed and decrepit (http://nextnavy.com/lets-build-a-new-national-shipyard-part-i/). If we actually built and maintained our ships for a 30-50 year life span (which those that are transferred to foreign navies often do complete), then perhaps we could actually grow our Navy to the size the we need at an achievable cost.

https://navy-matters.blogspot.com/search/label/Maintenance

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No argument here. I’d just like to point out the Tico’s, even if maintained correctly, can’t be upgraded to fulfill the mission they were designed to do. They would need to be upgraded to at least the current SPY-1 Aegis baseline but I don’t think they’re capable of doing that… and it would be even better if they were upgraded to SPY-6 but I don’t believe they have the power generation capability to do that plus run all the other ship systems.

At the end of the day the Navy needs more money, and be funded above inflation, to stay competitive. That requires a larger defense budget.

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I think what you're missing is that this is a pretty good option-pricing strategy. Spending a lot on maintenance detracts from buying new high-end stuff, which you may need when a war hits (and you have to keep the pipeline hot to be able to buy it at all). But as long as the maintenance isn't *too* bad, you can always throw manpower into fixing things up and extending service lives when you need to, with a lot less lead time than building new high-end assets.

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I think what you're saying makes sense in theory, although I highly doubt that the Navy is actually thinking that way (or thinking at all, for that matter). Regardless, modernizing and *expanding* our public shipyard capacity should be a no-brainer, especially for Democratic administration that would be able to easily justify adding thousands of blue and white collar jobs in (almost certainly) a blue/purple state.

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An initiative called the Shipyard Infrastructure Optimization Program that almost made it into BBB, but the Navy was too timid in pressing to get shipyard construction as a national asset included because the other services would’ve objected to the Navy getting a special cut out.

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Agreed about shipyard capacity. I think that just doesn't look sexy enough, but I'm with Hooper that it's super-important. I do think, though, that if you take a strong look at the history of military procurement, that optionality plays an enormous role, though one rarely discussed in public.

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Would repealing the Jones Act help? My sense is almost nothing is built in US shipyards except naval vessels at high cost. Why isn't our shipbuilding industry competitive with South Korea, Japan, Italy, France, Germany and the Netherlands? Is it that other countries are subsidizing shipyards and we aren't or have we allowed our shipbuilding capacity to atrophy? We used to be a great shipbuilding country but seem to have followed the Brits off the Clyde into the sea.

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Repealing the Jones Act, IMO, will be the final death nail into the commercial maritime industry. The Jones Act needs reform because all its doing is holding off the inevitable death of the American commercial shipbuilding industry. Yes, its a combination of governments *directly* subsidizing their industries and the US just giving up on our shipbuilding capacity. We’re basically half-assing our subsidies through a convoluted market oriented scheme… We should just take the veil off and directly subsidize what is a national asset. That goes for a lot of industries but maritime industries I’m most familiar with.

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But doesn't Matt answer your top part fairly completely? We want our military personnel to have a lot of skills, so we give them great benefits. Russia/China don't care if their military personnel have any skills, so they give them crap benefits.

Now, the political side of this is important: even if you give the military pretty great benefits, those benefits will always be a cudgel. See the debates over VA wait times.

I would argue, as with the police, that we should pay people in the military more, fire them more often for low performance (separations, not discharges), and give them cheaper benefits. However, no politician wants to be the "cheaper benefits for the military" guy, just like no one wants to be "pay police more but give them cheaper benefits" guy. Demosclerosis.

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Being one of these military personnel that’s a complicated statement to call the benefits great… they’re great for an entry level position but it’s basically a relative vow of poverty to stay in for a career because the private sector is way more lucrative after the 10 year mark.

I would argue for better actual benefits, remodeling the career path of officers and senior enlisted to account for modern circumstances of spouses having a career of their own instead of being baby factories and/or housekeepers, and finding a way to better evaluate performance (especially flag officers)…. On top of better pay.

That aside, pay/retirement is a large piece of our budget but the tasks the military here are asked to do vs Russia/China aren’t exactly comparable. Example, I’m still trying to understand the Army Corps of Engineers & why they’re responsible for levies & internal waterway management. Also a lot of the PRC’s budget is opaque. Their public numbers aren’t necessarily their actual numbers. Finally, as I pointed out in another thread the PLA(N)’s shipbuilding drive is multiples by the PRC’s national goal of becoming the dominate commercial shipbuilder in the world. NASSCO & HII don’t have that level of whole-of-government support… also not included in the PRC’s public or inferred defense budget.

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I think we have more of a doctrinal problem than a procurement problem. Both the LCS and Zumwalt failed because their missions evaporated or never made sense in the first place. That, in turn, created the procurement issues. It’s not that they weren’t worth their high price tag, it’s that they weren’t worth *any* price tag.

I think the current doctrinal problem is hard rather than stupid. On the one hand, the US needs a plausible path to win a GP conflict. But, on the other, it needs ships which fill the role that the Burkes and Fords do: park firepower in uncontested waters.

I don’t think these missions are that similar, honestly, and that really drives a lot of problems.

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This has, honestly, been a problem since the first SSN. The best sea-control ships at sinking enemy ships are SSNs, but they aren't great at, well, anything else that the navy is asked to do. Their entire job is to be invisible, which makes flying the flag a bit tricky, they can't intimidate, you can't announce their presence, and they can't protect merchant shipping other than by just sinking anything that threatens it (fine in wartime, not much good against, say, Somali pirates).

But all other ships in the navy fall into a single class in the classification system used by SSN commanders: targets. I think this has become increasingly true over the years; surface ships are ever more obvious and easy to spot, they are too big and too slow to avoid easy identification and location approaches like satellite photos, and they are too vulnerable to a torpedo or a hypersonic missile to be survivable in combat the way a WWI dreadnaught was.

All of that only applies in a peer/near-peer war, though. In other sorts of wars, the SSN is overkill.

Carriers are really useful for projecting airpower against anything other than an effective A2/AD system, which only peer adversaries have, and, there are like, only 2 of them (Russia and China), which reduces the need for the USAF to have quite so many bases all over the world. If the US needs to project airpower in the Middle East or Africa or South America, then either it needs USAF bases in range, which means empire-building to acquire island bases like Diego Garcia, and while the UK does have some (Ascension, Falklands, the sovereign bases in Cyprus) those are politically controversial, and would need a lot of expensive construction. Much easier to just park a carrier at the 12-mile limit for the duration of whatever you need to do.

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I wouldn’t say Burke’s and Fords can only park their fire power in uncontested waters. Carrier Strike Groups have a huge capacity for sea and airspace control. They can deny areas to enemy forces all on their own. I agree we have a doctrinal problem, but the problem was that the LCS and Zumwalts were designed and procured during GWOT where the Navy played second fiddle to the Army and the Air Force.

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I didn’t say only.

However, that is effectively their role and any discussion which says we have doctrinal problem starts from ex- or implicitly conceding that they’re not ships we see as acceptable losses.

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I agree that we need to improve the Navy for a possible war with China, and doing so requires improving shipyards. I'm curious though, how much of our current shipyard conditions is due to the longshoreman and shipyard unions? It has been like pulling teeth for the Biden administration to get them to agree to expanded operations in order to get through the ship backlog, and the admin is currently freaking out over the West Coast union contract negotiations. Even if there was political and military will to re-orient the Navy's goals, would personnel at shipyards hold them back from doing so?

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NASSCO and HII say they’re working hand in hand with their unions to recapitalize the maritime workforce through vocational training programs. They’re great paying jobs that require a ton of training but just a high school diploma. There were some tensions with HII during their work agreement renegotiation with respect to the role of temp contract workers.

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I wonder if part of the answer here is giving shipyards more commercial viability--would Jones act reform that allows more commercial viability be relevant here? Or are Naval and Commercial Shipyards totally distinct (or would having expanded non-defense use case make the career more appealing)?

I confess this is classic online neolib thinking--all american problems go back to Jones Act, Zoning, or an LVT, but you seem to be knowledgeable, and it seems plausibly significant here, so I'm curious if it ties in at all.

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I’m notionally pro-Jones Act but it needs to be reformed to actually accomplish what it was intended to do. The Maritime Administration needs to be granted more authorities… maybe even folding them into the DoD instead of being in DoT. Bigger, better and badder commercial shipyards are great for public shipyards that build Navy and auxiliary ships because they use the same workers, knowledge set, and bolster the same industry. If NASSCO can build more Alaska-class tankers then they can build more ESBs and TAK-Es for the Navy.

Neoliberal thinking needs to expand to a “both, and…” mentality wrt military spending. Ultimately its only 15% of the combined discretionary and mandatory budget… We can do both we just need to have a non-scarcity mindset.

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I basically agree with you (I've been saying that actually protecting a maritime shipbuilding industry is a good use of government money for a while now). However, I'm skeptical that we can physically build new shipyards, without running into endless NIMBY/environmental lawsuits. This is where cost disease & vetocracy really bite developed countries hard..... just tougher to build physical things these days with environmental regs and endless, nonstop lawsuits.

Maybe we could construct new shipyards in Mexico, and make them US-government owned? Just a thought

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I think the idea would be to expand current shipyards/graving yards or reconstruct/recommission BRAC’d shipyards that are still in need of environmental remediation that hasn’t been handed over for sale to local developers. There are plenty of those locations across the country, the issue more is developing the industrial base and the human talent that make up shipyards. Those communities have mostly been devastated with ship construction shifting to Asia, which makes this problem that much harder. It’s understandable why the US Navy is trying to shift towards smaller, autonomous vehicles because they don’t require a large industrial base or a more tech industrial base that is more oriented with the US’s current strengths… but as long as procurement remains an issue we’ll run into the same capacity problem.

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Procurement being broken implies that we're paying too much for some of the things we're buying / developing, but we're also not spending money in things we should be, like shipyard infrastructure. You're saying that to fix this will ultimately cost *more* than our current budget - we'd save money in some areas but on net spend more. I'm not surprised because that's usually how things work - making something better usually costs money rather than saves it. But can you explain in more detail?

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We have both a capacity issue that needs to be addressed and need to maintain our capabilities edge (ie our DDGs are say X times more capable than a PLA(N) DDG so it can kill more quicker and more efficiently before it’s swacked by more numerous PLA(N) forces). To fix this we need to invest in shipyards to build more ships and invest in R&D to make our units more capable. DoD could cut the Army’s active force structure to accomplish that but that would go against almost 80 years of traditionally cutting the defense budget into 1/3rd pieces between the Army, Navy and Air Force regardless of geopolitical circumstances. So while the Navy’s budget needs to increase and the Army’s slowly decrease during a time frame the overall pie needs to increase to facilitate that transition… assuming internal OSD politics will ever get to the point where there’s a consensus we need to focus on naval procurement and capability (which I don’t think we’re there yet… in fact we’re moving in the opposite direction because building up the Navy will be expensive).

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It's just a mystery to me why it's so difficult to increase our naval capacity, given that it involves creating more high-paying, traditionally unionized blue collar jobs, probably in swing states. Is it just that the payoff is outside of the election time range of the average politician?

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This is what I find so frustrating in the "run a government like a business" rhetoric, people don't build the space for productive failure and experimentation. I work in research on government procurement of emerging technologies, and a common barrier is that public purchasers are extremely risk averse. They're worried that if some new widget doesn't work they're on the hook. Similarly we demean and belittle them and their accomplishments.

I would actually like the government to take more risks in commercializing technologies, but the people who say they're going to run gov like a business instead just want to gut the public sector. The Arpa-e venture fund that funded solydnra, in retrospect was too successful, indicating that they took on insufficient risk, but the 2012 campaign successfully poisoned the discourse

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Unfortunately with all federal government procurement for it to get funding through Congress there has to be some sort of parochial interest that initiates the funding and then that Congressional delegation becomes the champion of said program. When that program fails or becomes obsolete it becomes almost impossible to kill programs off. LCS is a prime example of this… the Wisconsin and Mississippi delegations are their champions (and to a lesser extent where those LCSs are homeported at).

Also LCS was botched from concept of operations to actual design (see the Freedom-class’s faulty combining gear boxes)… Overall these series of failure lays at NAVSEA’s feet for designing such a poor fit and a series of OPNAV staff members for not saying enough early in the program & often enough in testimony to Congress.

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Apr 13, 2022·edited Apr 13, 2022

It's absolutely true that we need reforms to horrible gold-plated procurement programs that shoot for the moon and blow up halfway there (F-35, Ford, Zumwalt, LCS, etc). The Navy in particular has been the most egregious offender here in recent years, which is unfortunate, as they are arguably the most key branch against our primary threat (China). Thankfully, we seem to be making some progress in this direction. The B-21 appears to have been a remarkably well-run (by DoD standards) procurement program, and the AF has resolved not to repeat the F-35 mistake of trying to make one silver-bullet gold-plated program that will inevitably fall short at a massive price. The real question is whether USN can similarly sort itself out, as pretty much every recent Navy procurement program has been an absolute disaster, leaving the force woefully unprepared for conflict with China.

To the broader point, though, I do think we need to significantly increase defense spending, even though fundamentally reforming a broken procurement process to contain costs is also important. Like it or not, the US right now is the guarantor of global democratic values in an era where the #2 power (which itself continues hiking defense spending dramatically year-over-year) is a brutally repressive techno-dystopian state which would love to eradicate liberal democracy globally. Make no mistake, everything the PRC has done militarily for the past ~30 years is aimed directly at us, while we spent a couple decades tooling our military around counter-insurgency conflict. I think the current stat is that the PLAN floats something like 50% more new tonnage annually than the US Navy does. There's still a gap in existing tonnage, but that's gonna close quickly, and the PLAN is almost completely concentrated off the Chinese coast, while the USN is scattered around the world.

In the event that (god forbid) we do fight and lose a war with China, nobody will be looking back and saying "boy am I glad we scraped an extra $20B out of the FY 2023 budget". The best thing to do is to ensure that we retain enough of an edge that China doesn't take the swing in the first place.

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Concur the Navy’s procurement process is wholly broken and I think that’s understood within the Department of the Navy. The problem is the way the Department of Defense splits the defense budget into 1/3rd piece’s between the departments of the Army, Navy & Air Force won’t work for the next fight. As you pointed out the Navy & AF are the lead services in the Indo-Pacific and their restructuring to focus on that fight should be paid for by divesting of Army force structure but the internal war within the Pentagon at the OSD level won’t allow that. We shouldn’t give DoN more money until they’ve proven they’ve un-eff’d procurement & NAVSEA but how the existing defense split happens should be examined.

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We're in kind of a bad spot with the Navy where we don't have much choice but to increase funding even though, as you say, we also need dramatic reforms to the procurement process there. PLAN's breakneck shipbuilding pace is simply too great to wait. From what I read it seems like it may not even be really feasible, unfortunately, but I'd like to see investments made to increase the production rate of proven platforms like the Virginia-class and Arleigh Burke-class ships (the new frigates being based on a proven European design is also a good choice). This would help narrow the building gap in the short to medium term while avoiding flushing more money down the tubes on unproven garbage.

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The Department stated they’re focusing more on capability than capacity… ie they’re trying to make existing platforms more lethal with the subtext they understand they can’t keep up with the Chinese numbers. I think that’s the wrong approach, we need both capability and capacity. That approach is a cop out to either a flat or lower top-line. Congress will force one or two extra procurements of the newer Virginia Block (I think we’re up to Block V) and Arleigh Burke Flight IIIs, but we need DoN to both invest in capacity to build *more* and new capabilities because both of those platforms are maxed out.

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100% agreed!

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And a lot more hunter-attack submarines. China can't destroy those with land-bases missiles.

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I think a lot is being made of anti-access/area denial weapons and their nominal tactical reach but you have to find, fix and target surface vessels left of launching a DF-21/17. If you’ve ever tried to find something in the open ocean you know that’s a hard task for any Navy. Carriers and other surface ships still have a place in a modern maritime fight, they just don’t have the same overmatch they had in years prior.

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Generally a good post on a tough topic, but veers off a little at the end. My favorite analogy for helping people understand this topic, big picture, is grocery shopping.

If you heard someone complaining about how they spent too much (or not enough) on groceries, your first thought would probably be "well, for what?" Is this person a teetotaler vegetarian with plain tastes who lives out in the country with a substantial vegetable garden? In that case, $100/month might be more than enough for them to live a perfectly healthy life. But if they live in Manhattan and have 6 kids and have a weakness for fine wines and nice cuts of beef, they're going to spend well into the 4 figures a month at least, and that's just life.

So the fundamental questions are: what are we trying to do here? And are our resources, both in quantity and in how they're allocated, adequate to that task?

I think it's hard to see how the US' big picture strategy - deter Russia, and deter China, and oh yeah, Iran and North Korea too; and we need to fight terrorism; and also stop Somalian pirates if they come back; and.... - isn't underfunded. That's a lot of stuff to do across the whole planet! But there isn't likely a good way to pay for all that, as Matt says, and so adjusting our strategy is also important even as we try to get more bang for our buck in military procurement.

I do think this framework pushes back a little against Matt's argument later in the piece, though. The US actually does a decent job selling a lot of equipment to close allies - for all the justified complaints about the F-35, we're selling it to ~15 allied nations, and the final count will likely end up higher. (Canada is inching closer to being another) The reason we don't sell Ford class carriers to other countries isn't because they're expensive per se (though they are) it's because other countries do not have the same requirements to project power overseas that we do. Other countries are willing to go without carriers, or have much less capable carriers, because their interests aren't substantial enough to justify the costs - even if you cut the cost of a Ford class carrier by 75% or more, little Belgium just doesn't need one. That doesn't mean we don't, it means we have to look at our actual interests and capabilities.

The same applies to out strategic nuclear deterrent, which is also very expensive, and even our subs: a few key allies like the UK and now the Australians are involved in technology transfers, but given their location and threat sets, countries like Japan or South Korea just don't have a good reason to need nuclear powered subs. Advanced diesel/electric is just fine for their purposes. They don't need the increased cost and headache of dealing with nuclear when their subs don't need the improved range - their adversaries are fairly close!

So while "everyone else wants to buy this" is a decent heuristic for certain classes of weapons (which everyone needs) it's not necessarily applicable to all classes of weapons. It depends on what you have to do, which in turn is dependent on the size of your economy, your interests, your geographical position, your most likely threats, etc.

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"...even if you cut the cost of a Ford class carrier by 75% or more, little Belgium just doesn't need one...."

Fair point, but what about Lichtenstein? With just one carrier, they could double their landmass. Twice the acreage, and they'd no longer be a landlocked country, either.

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One problem with some of the big systems (e.g. carriers, AWACS, JSTARS) is that they are only useful in the context of a very large military, of which there are basically only four national militaries that big (US, China, India, Russia), of which none are current allies, and only India is a possible future ally.

But the combined EU or EuroNATO military would be easily big enough to justify all of those sorts of things. If you were looking at the European military as if it were a national force, the fleet is incredibly bottom-heavy; way too many coastal ships, but three undersized carriers and too many escorts. They could probably afford five Nimitzes and their full CVBGs (and should be able to afford five Fords if the price came under control) - ie half the USN - but the result of that would be that only two countries (UK and France) would have a full CVBG entirely of their own ships, and every other country would end up with either a carrier without escorts or an escort ship or two.

Much better would be for a few mid-size countries to scrap their air force and army and spend their entire defence budget on a full-up CVBG - something that, say, the Netherlands or Spain could afford.

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Europe's general view is that the US only needs half of its current military, so we're only going to spend half as much in relation to GDP as they do.

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+1

It's common when evaluating a complex, multivariate topic to pick a single proxy variable. In this case, it's total spending. Thinking through various military strategies; how to measure the capability to execute on them, often in the absence of real-world trials; and a cost-effectiveness measure is a very hard problem. Given this, it's understandable that journalists and congress would default to using total spending. But for experts to do this is not forgivable. Or, as Matt says, they are using spending to evaluate our ability to execute on an unrealistic or unwise strategy.

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Some interesting ideas here but I think a lot of this misses the fundamental problems and issues. Let's start from big picture to small:

1. Strategy - Fundamentally the primary roles of peacetime military forces are deterrence and preparing to fight future wars. The US, given our massive and global treaty commitments, needs a force structure that can accomplish this. There is obviously a lot of debate about how best to do that and each of those will come with a different price tag. So it's a mistake to talk about budget first. When any country is paying for a military, they are paying for specific military capabilities - and so the first order problem is determining what capabilities you want and/or need.

2. Budgeting and Procurement and reform - I think everyone realizes we get lower value per dollar spent than we should. This isn't just confined to military spending, but is a characteristic of most federal (and even state) spending. It costs us more to pave a mile of road, to teach a child, to provide healthcare and to provide military capability than most every other country.

So my view is that we should focus on getting more value instead of obsessing about topline budget numbers. And one way to get more value is by reforming our sclerotic federal bureaucracies. When basically every major project by any federal agency ends up mired in cost and time overruns and products that don't work, then that is a systemic problem. Even a signature high-profile program like Obamacare could not avoid sclerotic mismanagement. Addressing that problem, IMO, is critical to getting the military capabilities we need without throwing more money down the toilet.

Additionally, as I think Rabb and others mentions, we are overly-focused on technological superiority which has driven up costs and forced us to buy fewer platforms than we need. I think we ought to strip R&D from procurement - trying to invent new technologies in an acquisition contract is just bad.

3. Kill the myths - There are many myths that are frequently repeated as wisdom. The notion that aircraft carriers are no longer relevant is one highlighted in this post. Another is magical thinking about COTS solutions which has been around since I joined the military way back in the early 1990's.

On aircarft carriers, there are many significant capabilities that they provide that are simply not available anywhere else. The idea that their inability to safely operate next to the Chinese coast in a shooting war makes them obsolete is just ignorance. Nothing is invulnerable, war is not like the movies, and employment, tactics and supporting capabilities matter more than the strengths or weaknesses of any given platform. There is always going to be utility in having a mobile airfield - particularly in the Pacific where our fixed air bases would likely be destroyed or heavily damaged within the first minutes of a conflict with China. In other parts of the globe where the US doesn't have access to land-based airfields, carriers are the only game in town except for long-range bombers. Carriers are and will continue to be essential for maintain sea and air control and projecting power globally in ways no other platform can.

For COTS we've already wrung out most of the savings there. And one important factor for military hardware is ensuring the safety and reliability of components. That means you can't rely on foreign-based components for many critical systems. And since we've offshored many things to unreliable (from a national security standpoint) countries like China, you have to consider tradeoffs. Are you willing to source key components for our weapon's systems to China? Most are not because of the obvious risks.

So, as others have said, an adequate domestic industrial base that can support US military needs is important. Other countries understand this - we, apparently, do not.

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Excellent post. This really feels deserving of wider circulation!

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Thank you!

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Definitely agree!

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Thank you!

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“The wars of the future will not be fought on the battlefield or at sea. They will be fought in space, or possibly on top of a very tall mountain. In either case, most of the actual fighting will be done by small robots. And as you go forth today remember always your duty is clear: To build and maintain those robots.“

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Apr 13, 2022·edited Apr 13, 2022

I mostly agreed with the general thrust of this piece, that we should get more value out of the defense spending that we already do. But I was disappointed to see Matt repeating the old myth that defense spending is somehow 'crowding out' social spending.

I like to say this a lot, but like- I invite everyone to just take a look at the US federal budget. (Sorry I couldn't find 2021). https://www.cbo.gov/publication/57170 The US spends more just on healthcare for the elderly than the entire, famous military budget. We spend 70% more on Medicaid & Medicare than the military- Social Security is close to double the military budget. Social Security, Medicare, and Medicaid together are like 3.5x it. That's not even getting into the fact that a massive chunk of the military budget is personnel spending- almost 10% of it is Tricare, which is just another healthcare program for veterans.

And the 'we spend more than x countries combined' is a non-sequitur, given that the US economy is larger than every European country combined. I've never seen anyone say 'the US spends too much on healthcare and should cut back- we spend more on healthcare than the next 10 countries combined'. It's just comparing apples and escalators.

To put it another way- in 2020 we spent 10.8% of the US budget on the military. Why is 11% too high, exactly?

All that financial dominance, being the world's reserve currency and so on, is intimately tied up in having the most powerful military. We'd see a huge run on Treasuries and the dollar if markets decided that China is more powerful than us- like, say, by invading Taiwan or Japan while we do nothing. From a fiscal POV, the military budget is a big multiplier. But to Matt's point that we could be using our spending much more efficiently (possibly on new weapons startups?), yes I agree

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I don't think Matt's point was defense spending crowds out social spending per se, it's that it diverts labor and capital from the civilian economy, whether that's health care or cars or whatever.

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Great point. I bet if you asked people "What's a reasonable proportion of the federal budget to spend on defense?" the general answer would be much higher than ~11-15%.

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I’m starting to wonder if we’ve fully recognized just how much of a paradigm-shift is happening because of the current success of the Ukrainian defense. We might be seeing the tank go the way of mounted cavalry, given how vulnerable they have proven to be to shoulder-fired missiles. And there are almost certainly other current pieces of equipment that may also prove to be just as antiquated if they get put to the test in the same way Russia’s tanks have over the last few weeks. 21st century war seems to be as different from how it was in the 20th century as 20th century war was in the 19th century.

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Every person knowledgeable about tank warfare that I have read has said tanks are not obsolete, but rather the awful tactics used by Russia are. Tanks have been vulnerable to shoulder launched missiles since WW2, and longer ranged missiles since the 60s. Effective armies had to adapt to these changes and will keep doing so.

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If the Russians used dismounted infantry to halfway support their tank columns the war would be completely different. Ukraine displays Russian operational incompetence more than anything.

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I think that’s basically correct, but the American Javelin missile is far, far more effective than the previous generation of antitank missiles. The weapons available to the US and its allies prior to the Javelin - the Dragon and TOW missiles - were wire-guided systems that required the gunner to track a tank for the entire flight time of the missile, leaving the gunner exposed the entire time. The Dragon and TOW also had a more pronounced launch back blast making the firing easier for the enemy to detect. Another advantage of the Javelin is its “top-attack” mode that targets a tank’s relatively thinner top armor rather than the much better protected front and sides. (This is why so many photos of destroyed Russian tanks show their turrets blown completely off the tank’s chassis.)

All that said, I agree that tanks have not been rendered obsolete.

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Many of the videos that came out of the Syrian Civil War were spectacular (if that is the right word). You would have guys on a hill recording a TOW strike in HD.

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TOWs are funny to watch because they fly funny. “Spectacular” is often the apt, but unfortunate, word.

I generally avoid war porn as entertainment.

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We should always be careful about such things, of course. But there were reports that for the first couple weeks of the war the US was reluctant to hand them too much of our best materiel because everyone expected that the Russians would quickly dominate the Ukrainians and our latest and greatest stuff would end up who knows where.

There were the same concerns about the Stinger missiles the US gave to the Mujahideen when they were fighting the Soviets. That mostly seems to have been an overblown fear.

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Yes, the problems with Reagan's Afghanistan policy were strategic rather than tactical

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What problems are you referring to?

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The increased lethality of missiles is going to be even more dramatic when we see them unleashed against ships. The first time that one of our $10 billion dollar carriers is sunk by a $5 million dollar missile, there will be groans of despair throughout Washington.

It won't mean that fighting ships have no purpose, any more than it means tanks are obsolete.

But it will force many changes of tactics, and a wholesale rethinking of strategy. There's a reason that China has fought so hard to create islands from scratch in the sea: they push their ship-killers that much further out from shore.

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I always knew you can't spell "hypersonic" without "hype".

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Agincourt and Crecy were pretty far apart. High status military officials are hard headed, there's no reason anything has to change in our lifetime.

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There were victories in battles between Great Powers as a result of a well-handled cavalry charge as late as 1814; it took the arrival of the machine gun and the magazine rifle to definitively end cavalry as an effective shock arm.

What Crecy and Agincourt and the others did was that they forced commanders to use heavy cavalry as part of a combined arms doctrine, rather than them being able to dominate the battlefield virtually alone as they had for the preceding three or four centuries.

Tanks are still important weapons, but they can't be used unsupported. Honestly, they shouldn't have been used unsupported after the arrival of the bazooka in 1942, but modern ATGMs have swung the balance decisively away from the tank-alone doctrine and to combined arms.

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“…definitively end cavalry…”

Well, horse calvary anyway.

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Horse cavalry survived as scouts for a long time after the last effective cavalry charges; I'm sure that AFVs will do so even if tanks are vulnerable as combat arms. It took the arrival of fast, protected, motor vehicles in the 1920s for cavalry to be finally abandoned - mostly armoured cars at that time

Note that scout AFVs (armoured cars and light tracked vehicles; since the 1950s, militaries have used both) are already incredibly vulnerable to any sort of anti-armour weapon (even a 1950s RPG-7 will take out most modern scout vehicles, and certainly any sort of 1970s ATGM would go through them like a hot knife through butter). But that doesn't stop then being useful, just means that they need to hide and to turn tail and run when they are found.

Tanks proper are the equivalent not of all cavalry, but of shock heavy cavalry, capable of creating a breakthrough. What was true of heavy cavalry from around 800-900 or so until 1450 or so - that they could expect to create a breakthrough against infantry, and that the occasions when they failed were rare enough that they are remembered as great nation-creating victories (Bannockburn, Crecy, Morgarten, Agincourt) - was only really true of tanks from the mid-1930s until 1942 or 1943. It took combined arms after that, as unsupported tanks were too vulnerable to infantry and their support weapons - the great breakthroughs of 1944 were not achieved by rolling unsupported tanks through infantry the way that the Poles and French were defeated in 1939 and 1940.

This vulnerability of tanks - which has been well-understood for decades - is why the devastation of unsupported tank columns in Ukraine has been less revolutionary for many military commentators than some might expect.

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Tanks aren't going anywhere. Ukraine itself has something over 1000 tanks (not counting IFVs and other armored vehicles) and there's plenty of video of them being used in combat.

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"Often, and in the case of the Space Launch System, NASA puts out a very detailed Request for Proposals saying exactly what it wants, and really only a tiny number of well-connected insider companies are positioned to adequately answer all the specifications of the RFP."

Yes, this is how the military does it too (at least in Afghanistan, where I have some experience with the process). The contracting officer knows what brand he wants, his budget is essentially unlimited, and he writes the RFP so that only his preferred firm can meet the specs.

There's massive space for corruption here but actually, corruption isn't necessary to produce cost overruns in this scenario. The root of the problem is that KOs have no cost control incentives at all.

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Apr 13, 2022·edited Apr 13, 2022

Doesn’t the problem start at the top? If Congress imposes no cost discipline on DoD, it’s hardly a surprise DoD doesn’t prioritise cost efficiency. If Congress imposed more cost discipline, DoD would adapt

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I agree that you need global budget discipline, but it has to be made to ramify down to the KO level somehow. I'm sure it can be done although the lack of incentive pay structures in the military makes it harder.

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There is a lot of cost discipline but most of it is worse than worthless - it doesn’t provide the right incentives while requiring a lot of administration and bureaucratic block-checking.

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Same thing in state government. Convoluted contracting/bidding rules and extremely slow review processes mean leaders look for ways to shortcut. And so extremely specific RFPs are written for extremely specific companies that have already come through to make their pitch. It all seemed gross and wasteful but also everyone was doing it, regardless of which party was in charge.

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I think is right in the DoD...cost control has probably come to seem unnecessary because Congress routinely gives DoD what it asks for, so why bother trying to control costs?

What Matt describes NASA doing with COTS though came about because NASA doesn't get whatever they ask for and had to come up with a creative solution.

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As someone who rights about defense procurement for a living (here's our report on practices through FY 2020 https://www.csis.org/analysis/defense-acquisition-trends-2021 ) this is an interesting if not unfamiliar argument. Many of the people advocating for greater budgets are also fans of OTA or buying commercial.

That said, I think there are some limits to the space analogy in some traditional arms production sectors in that space (and some other advanced tech including AI) has a mix of billionaires and companies eager to invest, even at risk of a loss. I think Matt would reject some of the core premises of the recent administration state of competition report (which has some influence from curse of bigness monopoly fear https://media.defense.gov/2022/Feb/15/2002939087/-1/-1/1/STATE-OF-COMPETITION-WITHIN-THE-DEFENSE-INDUSTRIAL-BASE.PDF?source=GovDelivery ) but I do think that it would be harder to get at the shrinking number of providers in many of the sectors discussed than it would be for space.

I think there's two big points this analysis doesn't include:

* Intellectual property and data rights. Lets say you spend a lot on a OTA for some new breakthrough system. Who is allowed to produce and do key sustainment or upgrade tasks? Just the original producer or is the government buying those rights.

* International cooperation. Protectionism is rampant in the defense sector for both good and bad reasons. Doing more with the community of allied democracies is a big Congressional lift and thus far President Biden's rhetoric has been more on the Buy America side. The U.S. would still be dominant in any plausible model, but that is one of the bruising areas of defense reform that requires both executive branch and legislative champions.

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I think that the discussion should be also on what the budget is for.

I don't know the US DOD budget but in Israel, where I am from, MOD is responsible for many activities that are practically civilian and should not be done by MOD, for example many of the operational work in the first months of COVID19.

The problem is that MOD is the only "capable" organization that can do many complicated things, but its only a result of years over years of drying the civilian ministries, so when the time comes, they cant perform as good as the MOD that gets huge budgets that they can spend in a very inefficient way, for example by using thousands of underpaid mandatory service soldiers that join every year for at least 2 years and mostly 3 years.

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The US Army never wants to do occupation and counterinsurgency. We keep doing them anyway. "Hope someone else handles the occupations" isn't good enough. To avoid occupation quagmires, we need a better plan than hope.

When America patrols against insurgents, like in Vietnam, it's deadly to us. Yet when we leave the locals to do it, like in Afghanistan, it's deadly to their country.

Is there a third way?

In the age of empires, the British used "sepoys". These were local troops, but trained by the British, and kept under British command. Because the troops were locals, they knew the language and didn't run up the British body count. Because the British commanded, the troops could be kept out of corrupt local deals to serve feuds or surrender to rebels.

The sepoys weren't magic. (See the Indian Mutiny, or stupid British strategies in Afghanistan.) But the sepoys were a lot better, person for person, than either locally commanded forces (feuds and corruption) or all-British forces (politically expensive and culturally ignorant).

But historically, sepoys go with colonialism and empire. I'd like to think today's America wouldn't end up with de facto colonies. Still, you'd get nervous if America started enlisting foreigners, under American command, to control occupied foreign lands.

Whether it's sepoys or something else, "hope we can avoid another insurgency" is an answer that keeps failing. We need a better one.

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Here's where an American Foreign Legion (modeled on the French Foreign Legion) could play a role! :) (I am mostly joking. Like 60% joking)

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Mr. Yglesias is too polite to call corruption by its name, but that is what is weakening the US military and robbing the taxpayers. When ex-Raytheon employees run the Defense Department and one procurement disaster follows another, there is no other explanation. One cannot fix a problem until it is acknowledged, so timid commentary like this article is a waste of time. The reason the defense budget keeps going up is that the arms makers own the Congress. We have a coin-operated government, and the arms makers are reaping an excellent return on their political investments.

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<i>Focus on the fact that most countries would rather ally with the United States</i>

Don’t worry, I’m sure that by 2028 the second Trump administration will have convinced them all of the need to quickly make other plans.

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How do you think that the US should not defend Europe from Russia but in the same paragraph argue for the expansion of NATO? Those are incompatible. If Russia attacks Poland we are obligated to come to their defense if they ask for it.

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If Europe was capable of defending itself, the US would not have to maintain readiness to deter a Russian attack. Obviously we *should* help if Russia attacks Poland or wherever, ideally with things that we are actually well-suited to (i.e. not deploying a large land force to directly combat the Russians), but if Germany and France are capable of defending the continent perfectly fine on their own, the US will no longer need to maintain the ability to project power in Europe and can instead divert some of those resources to Asia and some back into domestic programs.

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If Europe was more responsible for its defence, its energy policy might not have been such a complete disaster. Years after the first invasion of Ukraine, with Putin interfering in one Western election after another, Europe kept increasing its dependency on Russian energy.

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I think you should at least consider the possibility that if Europe had been more responsible for its defence, its energy policy might have been even *more* tightly tied to Russia, as an insurance policy.

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founding

He thinks the US shouldn’t be defending Europe by itself. It should be supporting NATO to defend Europe.

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. . . that is already the current situation? It is emphatically not the case that the US is 'defending Europe by itself'.

The standard demand from the US is for countries to spend at least 2% of their GDP on defence. It needs to be noted that since America has a much bigger GDP than any other NATO member, America would still be by far the largest contributor even in an 'equal' setting.

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Matt, you're 100% right about how inefficiently we spend our defense money. I'm a soldier in the army and we have an incredible amount of contracted produced equipment that either is completely useless for how we actually fight or is unreliable and breaks all the time. We stick it in a closet and only pull it out to inventory it. Once a colonel came to visit my unit and interviewed us about these new PFDs the army just fielded (basically fancy Samsung phones) and he asked people what they thought about them. A private raised his hand and said "well, sir, they're not waterproof and it rains all the time here." The colonel responded "damn we never even thought of that." We spend our defense money on a lot of dumb stuff.

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