CEO Jim Taiclet outlined a new “commercial-like” arrangement with the Department of Defense under which Lockheed would receive compensation even if the government altered procurement plans or reduced anticipated production quantities. Presented as a mechanism for stabilizing supply chains and accelerating weapons production, the arrangement effectively transfers additional market risk from the weapons maker to the taxpayer.
In practice, the new model appears to guarantee that Lockheed can expand production capacity with reduced exposure to the kinds of commercial uncertainties that normally discipline private firms. At a moment when Washington is once again invoking great-power competition to justify extraordinary military expenditures, the arrangement deserves scrutiny.
Far from a simple contracting innovation, the new approach represents another step in the long evolution of America’s military-industrial system towards an ever more corporatist order in which profits remain private while risks fall on the public.
Huh. An instance of surveillance pricing?
The defense industry sets the pricing and the American taxpayer just has to pay it.