For years, senior Pentagon officials have been hectoring defense companies to put more “skin in the game” by increasing their spending on research and development and investing more of their own money on infrastructure and production technologies. The Pentagon wanted these companies to spend more of their own money to develop next-generation products. But without a reasonable prospect of a production program that generates a revenue stream and profits, what incentive is there for a company to risk its own funds? For the longest time, Pentagon leadership apparently refused to accept the simple fact that private companies require appropriate incentives for innovating or improving production processes. The good news is that defense companies are once again willing to spend their own money on R&D and capital improvements. In large measure, this change reflects the new attitude exhibited by the Department of Defense towards industry. I have written more about this for The National Interest here.
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