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Generally I would say this is a good measure for companies that serve individuals. Person A shops around and buys a car that most meets their needs/budget. This

Generally I would say this is a good measure for companies that serve individuals. Person A shops around and buys a car that most meets their needs/budget. This goes out the window once you enter the world of government contracts, especially large scale ones. You currently have a few large companies; Boeing, Lockheed, Northrop, etc. that land all the major contracts. The landing of these contracts though is for the most part based on government lobbying, the assurance of a nice private sector job post government retirement and a large helping of 'this is the way we have always done it'. This has recently led to debacle after debacle where the end user (the US taxpayer) is left holding the bag for massive global corporations that continue to profit. When there is an incident large enough to cause people to sit up and take notice, the ceo of the company gets a massive golden parachute and the company says 'see we took care of it. wink wink'. Look at the F-35, Littoral Battleship, and the subject of this article. If the government started bidding out smaller real hardware contracts to new companies, we would see a rise in new competitors and an accompanying rise in quality and roi. To do that though lobbying would have to be severely curtailed. Probably not going to happen.

magduf 7y ago
>If the government started bidding out smaller real hardware contracts to new companies, we would see a rise in new competitors and an accompanying rise in quality and roi. Do you have any evidence that this would actually work? Small companies generally don't have the resources to do large project. How is a small company going to build a state-of-the-art fighter jet? It's pretty much impossible. Look at other countries to see how they do it with small companies: they don't. The European nations basically have only a few large companies, the Chinese are the same, and so are the Russians. The reasons America had a lot more aerospace companies in decades past are 1) planes were a lot simpler, 2) they were wiling to accept higher risk back then (some test planes crashing and killing the pilot was OK), and 3) the defense budget was enormous because there was a Cold War and the US's economy was gigantic thanks to being the only industrial power left standing after WWII. #3 is probably the biggest factor, and isn't going to happen again. As for the stuff about golden parachutes, that's endemic to US companies in general, not just contractors. I don't see how it really affects competition much since everyone does it, except that it adds costs to American companies that, for instance, Chinese companies do not have, so it's probably bad in the long term for American competitiveness, but that really doesn't affect this argument for competitiveness between US government contractors (since they don't compete with foreign companies anyway). The bit about "a nice private sector job post government retirement" is pretty much the same: it's bad for American competitiveness, but doesn't affect things much internally, except that it probably makes upstart companies more competitive as far as costs go, but since acquiring contracts is very political it actually probably hurts upstarts since they're not connected the way the incumbents are. Also, I should add they government actually does farm out smaller contracts to smaller companies. They even have a policy I think which causes them to do this more than they probably should, in an effort to help small companies. They don't farm out fighter jets to small companies, of course, but there are a bunch of processes that cause them to farm out small things to small companies. The other thing that's important to understand is that most small companies do NOT want government contracts, if they're not already in that business. It's not like there's small companies that would be happy to bid on these things but are being prevented. In reality, government contracting is a giant pain in the ass, so the companies that do it are ones that are interested in it, and are good at it: their processes are set up to handle that kind of business model. Bidding on contracts is a pretty arduous thing and requires a lot of specialized skill and knowledge and special staff, so companies that aren't in that sector just don't bother.
magduf 7y ago
Sorry to reply twice, but I think there's more here to address. First, the thing about cars doesn't work even for individuals, because it's not comparable. Buying an all-new spacecraft or aircraft isn't anything like buying a car. Cars are engineered and designed for a market, and manufactured in quantities of tens to hundreds of thousands or more. This is more like getting an extremely custom house built for yourself (think something like a Frank Lloyd Wright house, not a subdivision house): you have to find someone who can architect it, and someone to build it. Neither of these is easy because the house is entirely unique and not even like other houses. It's not something you can just go pay someone to do and not think much about, like you can with a car: you have to be actively involved in the design and construction process. >If the government started bidding out smaller real hardware contracts to new companies What companies have these abilities? Would you have a super-custom mansion designed and built by some random guy you met on a street corner? Of course not. You have to find someone who can actually do the work, and you have to be careful because a bunch of people will claim they can do it, but they really can't, so you can't accept their bids, and that means you have to do a lot of work in verifying they're capable of delivering. Building a new spacecraft or airplane isn't trivial, and isn't something some small company can just do, like you seem to believe. How is a new company going to start up that can actually do these things? The only reason SpaceX worked out is because a billionaire started it as a hobby project, and even there, it's been at it for well over a decade now. Same goes for Blue Origin: it wouldn't exist if it weren't for some billionaire who apparently had nothing better to do with his time. Even going back to the old days, this is what happened with TWA and Hughes aviation: Howard Hughes was a billionaire who inherited his fortune and got bored with oil drilling bits. You can't just award a hardware contract to some tiny company that has no ability to deliver on the contract in a reasonable timeframe.

magduf 7y ago

>If the government started bidding out smaller real hardware contracts to new companies, we would see a rise in new competitors and an accompanying rise in quality and roi. Do you have any evidence that this would actually work? Small companies generally don't have the resources to do large project. How is a small company going to build a state-of-the-art fighter jet? It's pretty much impossible. Look at other countries to see how they do it with small companies: they don't. The European nations basically have only a few large companies, the Chinese are the same, and so are the Russians. The reasons America had a lot more aerospace companies in decades past are 1) planes were a lot simpler, 2) they were wiling to accept higher risk back then (some test planes crashing and killing the pilot was OK), and 3) the defense budget was enormous because there was a Cold War and the US's economy was gigantic thanks to being the only industrial power left standing after WWII. #3 is probably the biggest factor, and isn't going to happen again. As for the stuff about golden parachutes, that's endemic to US companies in general, not just contractors. I don't see how it really affects competition much since everyone does it, except that it adds costs to American companies that, for instance, Chinese companies do not have, so it's probably bad in the long term for American competitiveness, but that really doesn't affect this argument for competitiveness between US government contractors (since they don't compete with foreign companies anyway). The bit about "a nice private sector job post government retirement" is pretty much the same: it's bad for American competitiveness, but doesn't affect things much internally, except that it probably makes upstart companies more competitive as far as costs go, but since acquiring contracts is very political it actually probably hurts upstarts since they're not connected the way the incumbents are. Also, I should add they government actually does farm out smaller contracts to smaller companies. They even have a policy I think which causes them to do this more than they probably should, in an effort to help small companies. They don't farm out fighter jets to small companies, of course, but there are a bunch of processes that cause them to farm out small things to small companies. The other thing that's important to understand is that most small companies do NOT want government contracts, if they're not already in that business. It's not like there's small companies that would be happy to bid on these things but are being prevented. In reality, government contracting is a giant pain in the ass, so the companies that do it are ones that are interested in it, and are good at it: their processes are set up to handle that kind of business model. Bidding on contracts is a pretty arduous thing and requires a lot of specialized skill and knowledge and special staff, so companies that aren't in that sector just don't bother.

magduf 7y ago

Sorry to reply twice, but I think there's more here to address. First, the thing about cars doesn't work even for individuals, because it's not comparable. Buying an all-new spacecraft or aircraft isn't anything like buying a car. Cars are engineered and designed for a market, and manufactured in quantities of tens to hundreds of thousands or more. This is more like getting an extremely custom house built for yourself (think something like a Frank Lloyd Wright house, not a subdivision house): you have to find someone who can architect it, and someone to build it. Neither of these is easy because the house is entirely unique and not even like other houses. It's not something you can just go pay someone to do and not think much about, like you can with a car: you have to be actively involved in the design and construction process. >If the government started bidding out smaller real hardware contracts to new companies What companies have these abilities? Would you have a super-custom mansion designed and built by some random guy you met on a street corner? Of course not. You have to find someone who can actually do the work, and you have to be careful because a bunch of people will claim they can do it, but they really can't, so you can't accept their bids, and that means you have to do a lot of work in verifying they're capable of delivering. Building a new spacecraft or airplane isn't trivial, and isn't something some small company can just do, like you seem to believe. How is a new company going to start up that can actually do these things? The only reason SpaceX worked out is because a billionaire started it as a hobby project, and even there, it's been at it for well over a decade now. Same goes for Blue Origin: it wouldn't exist if it weren't for some billionaire who apparently had nothing better to do with his time. Even going back to the old days, this is what happened with TWA and Hughes aviation: Howard Hughes was a billionaire who inherited his fortune and got bored with oil drilling bits. You can't just award a hardware contract to some tiny company that has no ability to deliver on the contract in a reasonable timeframe.