DefRep Analysis: Aircraft R&D – A procurement history lesson

30 January 2015 – Kingston, CA
By  Chris Murray

My first class at RMC we studied the aircraft development programs of various countries between the first and second world war. “Why in God’s name” some of you might ask? The lessons we took away from it were incredibly interesting and not simply for the pure academic pleasure of the thing. The insights these lessons can provide when applied to current defence procurement strategies we face today are quite telling. We are able to witness, in real time, the successes and failures the adoption of these various procurement strategies repeated. As we learnt these lessons we looked around and saw them being repeated.

What we looked at was Italian, French, British, German, American and Soviet (maybe even a few others I don’t recall) aircraft development programs, both military and otherwise. It is important to remember that this was at a time when government had a significant interest in seeing the developing this new technology in both commercial and military spheres rapidly accelerated. In the case of the military sphere the lessons of the FWW certainly played no small role in lighting that fire.

The full range of models from full on free market, unregulated, private company, capitalist competition, all the way across the board to the other side, a nationalized, state run industry were represented. During the period in question this was Germany and the USSR respectively. Today it might be fair to characterize it as the US and China, “ah ha” you say.

What we saw when looking at the different models was that the countries that went full state had no drive to promote innovation, We began to realize that nationalized programs breed fat bloated unimaginative bureaucracies where innovation is in a sense a criticism of the government and therefore viewed as the enemy and actively discouraged for upsetting the equilibrium of group-think and consensus. This was certainly the case in the USSR during the period we studied. The soviet system lagged behind due to failure to innovate. Innovation was not only not supported but viewed as a threat to state thinking.

Meanwhile the German system lagged behind but for very different reasons. Unregulated, the industries operating costs skyrocketed in response to increased demands for specialized materials. The unregulated competition drove up material costs and halted production. Innovation was further stymied by the protection of proprietary institutional knowledge that was protected not shared among the industries’ companies. This in effect shut off progress in innovation and design in favour of total competition to the point of mutual failure. The models that were fully private and competitive (think modern USA) like Germany created environments where profit stymied progress by putting proprietary barriers into the exchange of information and ideas.

It turns out the best model was a mixed one where private companies did the work but operated under a government mandate and regulated umbrella that determined cost, profit and most importantly shared proprietary data but implemented fair compensation for sharing this information. That way everybody got to see what everyone else was doing but each winning idea got a reward. Guess which country it was… the US.

It is sadly ironic that the best system was the American one and that this approach has not only been abandoned, its lessons ignored but that today to suggest such a system in the US would incite screams of “Communism!”

Say what you will, it worked. It worked because the US Government regulated cost of materials subsidized the industry and kept costs low. The government promoted the free exchange of ideas by sharing data while managing to protect and reward winning designs. They also promoted competition; the guy with the best design won but had to hand the design over to the government to share with other companies so they too could build it as well and rapidly fill government contracts. All this while the government guaranteed a fair compensation fees for the use of the winning design, thus keeping innovation profitable. It also let everybody see what everyone else was doing and improve it, fix mistakes and build the next better one off of that shared foundation.

Procurement programs, to work, require the government to exercise a heavy hand and be actively involved in everything from concept through R&D to production. This has to, however, be balanced with a respect paid to private enterprise whose competitive nature serves to drive innovation. The government line is a fine one and likely its most important task is its most challenging. Their competitive drive breeds innovation. Paired with a government that fosters discourse and values progress more highly than greedily protecting intellectual property to the point where it makes the exchange of ideas impossible is essential. The government must ensure this innovation is shared across the industry. It must insure that a winning approach, design, or innovation is profitable and rewarded but it must also ensure that these lessons are shared with other companies in the industry so that these lessons can be built upon by all minds. Doing so avoids redundancy and parallel counterproductive courses at cross-purposes.

The reason the Americans were so successful was because of their ability to balance private needs with that of government. The US allowed for profit and advantage while not going so far as having it hinder the development of new ideas. The US system was one where thinking outside of the box held the promise of reward.

Today we see warning signs that in defence industries such as the American’s that the industry threatens to replay the mistakes and ignore past lessons. Today the Americans have adopted a system much like that of the Germans wherein the protection of proprietary data reigns supreme and it’s becoming debilitating. The fiercely protective and competitive corporate model is counter to the best interests and aims of the defence sector. Wresting control away from defence companies is a difficult proposition made more so by their entrenched position and massive lobbying potential within the American political system. However it is without a doubt an essential element in addressing the current and growing issues within the defence sector. This does not mean ignoring that which is important to the private sector but not placing it as the highest priority to which all else is subservient. It is in the best interests of the nation, the defence sector and the industries themselves to see these private interests become balance with that of the ‘greater good.’

The one note of good news is the Americans are far from suffering from the worst of it. The one model that is most certainly doing worse is the Chinese. Despite claims of success and drum beating rhetoric about Chinese military growth it still remains for the most part, pardon the phrase, a paper tiger.

China, where the defence industry is sate run, suffers a similar fate where we see the Chinese unable to problem-solve, troubleshoot or in fact design anything of originality at all. The only thing the Chinese defence industry seems capable of doing with any success is copying other designs. The catch is that when there are failures in those designs the Chinese have been at a loss as to how to address them

In order for the US to remain on the cutting edge it must adopt its past system, a system that today would by many elements be railed against as communist, anti-American, or anti capitalist ironically it is in fact this sound and balance economic approach that is responsible for past American economic and defence successes.
So there you have it, lessons from history

Feature Photo – American officer inspecting downed Akutan Zero c. 1942, Wikimedia Commons, 2015

DefenceReport’s Analysis is a multi-format blog that is based on opinions, insights and dedicated research from DefRep editorial staff and writers. The analysis expressed here are the author’s own and are separate from DefRep reports, which are based on independent and objective reporting.

Chris is a PhD student at King’s College London, Department of Defence Studies. He holds both a BA in Anthropology and an HBA in History from Lakehead University, as well as an MA in War Studies from the Royal Military College of Canada. He specializes in irregular conflicts, asymmetrical warfare, insurgency, revolution, guerrilla warfare, resistance movements, and rebel forces. His primary area of focus is the Caucasus, Eastern Europe, and the Balkans. Chris has served as an officer in the Royal Canadian Navy, as well as an advisor to the office of a Member of the Parliment of Canada.